1. RBI Policy on Foreign Investment

2. Roll no
Name
5102
Parul Lakum
5134
Urvi Patel
5148
Palak Solanki
5181
Heena Modi

3. Foreign investment
Any investment flowing from one country into another is foreign investment.
Financial investment by which a person or an entity acquires a lasting interest in, and a degree of influence over, the management of a business enterprise in a foreign country is foreign investment.   

4. How does the Indian government classify foreign investment?
The Indian government differentiates cross-border capital inflows into various categories :
Foreign direct investment (FDI)
Foreign institutional investment (FII)
Non-resident Indian (NRI)
Person of Indian origin investment(PIOI)

5. Inflow of investment from other countries is encouraged
since it complements domestic investments in capital-scarce
economies of developing countries.
India opened up to investments from abroad gradually over
the past two decades, especially since the landmark
economic liberalization of 1991.
Apart from helping in creating additional economic activity
and generating employment, foreign investment also
facilitates flow of technology into the country and helps the
industry to become more competitive.

6. Difference between FDI and FII
1. FDI is an investment that a parent company makes in a foreign country.
whereas FII is an investment made by an investor in the markets
of a foreign nation.
2. FII can enter the stock market easily and also withdraw from it easily. But
FDI cannot enter and exit that easily.
3. Foreign Direct Investment targets a specific enterprise. The FII increasing
capital availability in general.
4. The Foreign Direct Investment is considered to be more stable than
Foreign Institutional Investor.
5. FDI flows into the primary market, the FII flows into secondary market.
6. FIIs are short-term investments, the FDI's are long term.

7. Government of India facilitates Foreign Direct Investment (FDI) and investment from Non-Resident Indians (NRIs) including Overseas Corporate Bodies (OCBs), predominantly owned by them, to complement and supplement domestic investment.
Foreign technology induction is encouraged both through FDI and through foreign technology collaboration agreements. A foreign company planning to set up business operations in India has the following options:
a) investment under automatic route
b) investment through prior approval of Government.

8. Automatic route:
FDI in sectors/activities to the extent permitted under automatic route does not require any prior approval either by the Government or RBI.
The investors are only required to notify the Regional office concerned of RBI within 30 days of receipt of inward remittances and file the required documents with that office within 30 days of issue of shares to foreign investors.
List of activities or items for which automatic route for foreign investment is not available, include the following:
Banking
NBFC's Activities in Financial Services Sector
Civil Aviation
Petroleum Including Exploration/Refinery/Marketing
Housing & Real Estate

9. Venture Capital Fund and Venture Capital Company
Investing Companies in Infrastructure & Service Sector
Atomic Energy & Related Projects
Defense and Strategic Industries
Agriculture (Including Plantation)
Print Media
Broadcasting
Postal Services Development Sector for Investment from
Persons other than NRIs/OCBs.

10. Government approval:
FDI in activities not covered under the automatic route, requires prior Government approval and are considered by the Foreign Investment Promotion Board (FIPB).
Approvals of composite proposals involving foreign investment/foreign technical collaboration are also granted on the recommendations of the FIPB.
Application for all FDI cases, except Non-Resident Indian (NRI) investments and 100% Export Oriented Units (EOUs), should be submitted to the FIPB Unit, Department of Economic Affairs (DEA), Ministry of Finance. Application for NRI and 100% EOU cases should be presented to SIA in Department of Industrial Policy & Promotion.

11. It includes :
All proposals that require an Industrial License which includes
the item requiring an Industrial License under the Industries (Development and Regulation) Act, 1951
foreign investment being more than 24% in the equity capital of units manufacturing items reserved for small scale industries
all items which require an Industrial License in terms of the location policy notified by Government under the New Industrial Policy of 1991.
All proposals in which the foreign collaborator has a previous venture/tie up in India.
All proposals relating to acquisition of shares in an existing Indian company in favor of a foreign/NRI/OCB investor.
All proposals falling outside notified sectoral policy/caps or under sectors in which FDI is not permitted and /or whenever any investor chooses to make an application to the FIPB and not to avail of the automatic route.

12. Prohibited Sectors
The extant policy does not permit FDI in the following cases:
Gambling and betting
Lottery Business
Atomic Energy
Agricultural or plantation activities of Agriculture

13. Investment by way of Share Acquisition
A foreign investing company is entitled to acquire the shares of an Indian company without obtaining any prior permission of the FIPB subject to prescribed parameters/ guidelines.
If the acquisition of shares directly or indirectly results in the acquisition of a company listed on the stock exchange, it would require the approval of the Security Exchange Board of India.

14. New investment by an existing collaborator in India
A foreign investor with an existing venture or collaboration (technical and financial) with an Indian partner in particular field proposes to invest in another area, such type of additional investment is subject to a prior approval from the FIPB, wherein both the parties are required to participate to demonstrate that the new venture does not prejudice the old one.

15. General Permission of RBI under FEMA
Indian companies having foreign investment approval through FIPB route do not require any further clearance from RBI for receiving inward remittance and issue of shares to the foreign investors.
The companies are required to notify the concerned Regional office of the RBI of receipt of inward remittances within 30 days of such receipt and within 30 days of issue of shares to the foreign investors or NRIs.

16. Choice of forms for Doing business in India
Foreign investor
Unincorporated entities
Liaison office
Branch office
Project office
Incorporated entities
Public/private company
Subsidiary/joint venture
Limited liability partnership
partnership

17. Unincorporated entities a) Liaison office:
I)can only undertake
liaising/representing/promoting/communication
activities
ii)Location expenses have to be met through inward
remittances from overseas entities
iii)required registration with RBI and ROC

18. b)Branch office:
I)can undertake activities- export/import of goods,
professional/consultancies services, research
work, technical/financial collaboration, buying/selling agent, IT
services/development of software, technical support, foreign
airline and shipping company.
ii)can not undertake retail trading activities,
manufacturing/processing activities.
iii)Can acquire property but not for leasing/renting
iv)Require registration with RBI and ROC

19. I)Foreign companies planning to execute specific project in India
C) Project office:
I)Foreign companies planning to execute specific project in India
can set up project/site offices in India if it has secured contract
from Indian company
ii) Project office can not undertake or carry on any activity other
than the activity relating and incidental to execution of the
project
iii)funded directly by inward remittance or bilateral or loan from
multilateral International Financing Agency or project has been
cleared by appropriate Authority or Indian company who has
awarded contract has been granted Term Loan by a Public
Financial Institution or a bank in India for a project
iv) Required intimation with RBI and registration with ROC

20. Partnership firm
-Relevant for investment only by NRI/PIO
-Unlimited liability
Incorporated entities
Limited liability partnership
-Required incorporation under the Limited Liability
Partnership Act
- Presently FDI policy do not recognize LLP as a form in
which FDI is permitted.

21. Choice of forms for doing business in India
Incorporated entities:
Liability
Limited
By Shares
By Guarantee
Having Share Capital
Not Having Share Capital
Unlimited
Shares
Guarantee

22. Investment Instrument
Shares
Shares
Equity Shares
Preference Shares
Compulsory convertible
i.e. Non-Redeemable
Traded as Equity
Non convertible
i.e. Redeemable
Traded as Debt
(ECB)

23. Debt Debt Debenture Compulsory convertible i.e. Non-Redeemable
Traded as Equity for FDI
Non convertible
i.e. Redeemable
Traded as Debt
FCCB
Loan

24. Pricing guidelines Fresh Issue of Shares:
Price of fresh shares issued to persons resident outside India under the FDI Scheme, shall be :
1. On the basis of SEBI guidelines in case of listed companies.
2. not less than fair value of shares determined by a SEBI registered Merchant Banker or a Chartered Accountant as per the Discounted Free Cash Flow Method (DCF) in case of unlisted companies.

25. 3.The above pricing guidelines are also applicable for issue of shares against payment of lump sum technical know how fee / royalty or conversion of ECB into equity or capitalization of pre incorporation expenses/import payables (with prior approval of Government).
Preferential Allotment: In case of issue of shares on preferential allotment, the issue price shall not be less that the price as applicable to transfer of shares from resident to non-resident.

26. Right Issue: The price of shares offered on rights basis by the Indian company to non-resident shareholders shall be;
i) In the case of shares of a company listed on a recognized stock exchange in India , at a price as determined by the company.
ii) In the case of shares of a company not listed on a recognized stock exchange in India, at a price which is not less than the price at which the offer on right basis is made to the resident shareholders.

27. Mode of Payment 1. Inward remittance through normal banking channels.
An Indian company issuing shares/convertible debentures under FDI Scheme to a person resident outside India shall receive the amount of consideration required to be paid for such shares /convertible debentures by:
1. Inward remittance through normal banking channels.
2. debit to NRE / FCNR account of a person concerned maintained with an AD category bank.

28. 3. Conversion of royalty / lump sum / technical know how fee due for payment or conversion of ECB, shall be treated as consideration for issue of shares.
4. Conversion of import payables / pre incorporation expenses / share swap can be treated as consideration for issue of shares.
5. Debit to non-interest bearing Escrow account.

29. Thank You….