Section 4 in The Foreign Exchange Management (Transfer Or Issue Of Security By A Person Resident Outside India) Regulations, 2000
4. Restriction on an Indian entity to issue security to a person resident outside India or to record a transfer of security from or to such a person in its books.
- Save as otherwise provided in the Act or Rules or Regulations made thereunder, an Indian entity shall not issue any security to a person resident outside India or shall not record in its books any transfer of security from or to such person:Provided that the Reserve Bank may, on an application made to it and for sufficient reasons, permit an entity to issue any security to a person resident outside India or to record in its books transfer of security from or to such person, subject to such conditions as may be considered necessary.[5. Permission for purchase of shares by certain persons resident outside India. - (1) (i) A person resident outside India (other than a citizen of Bangladesh or Pakistan or an entity incorporated outside India, (other than an entity in Bangladesh or Pakistan), may purchase shares or convertible debentures of an Indian company under Foreign Direct Investment Scheme, subject to the terms and conditions specified in Schedule 1.Explanation : Shares or convertible debentures containing an optionality clause but without any option/right to exit at an assured price shall be reckoned as eligible instruments to be issued to a person resident outside India by an Indian company subject to the terms and conditions as specified in Schedule I.][Further, shares or convertible debentures containing an optionality clause but without any option/right to exit at an assured price shall be reckoned as eligible instruments to be issued to a person resident outside India by an Indian company subject to the terms and conditions as specified in Schedule I.] [Added by Notification No. G.S.R. 805 (E) dated 12.11.2013 (w.e.f. 8.5.2000)](ii)[ Notwithstanding anything contained in sub-regulation (i) above, a person who is a citizen of Bangladesh or an entity incorporated in Bangladesh may, with the prior approval of the Foreign Investment Promotion Board of the Government of India, purchase [shares or convertible debentures or warrants] [Inserted by G.S.R. 713(E), dated 23.10.2007 (w.e.f. 14.11.2007).] of an Indian company under Foreign Direct Investment Scheme, subject to the terms and conditions specified in Schedule 1.](iii)[ Further, notwithstanding anything contained in clause (i) of the sub-regulation (1) above, a person who is a citizen of Pakistan or an entity incorporated in Pakistan may, with the prior approval of the Foreign Investment Promotion Board of the Government of India, purchase [shares or convertible debentures or warrants] [Inserted by Notification No. G.S.R. 946 (E) dated 22.10.2012 (w.e.f. 1.8.2012)] of an Indian company under Foreign Direct Investment Scheme, subject to the terms and conditions specified in Schedule 1.Provided further that notwithstanding anything contained in Schedule 1, the Indian company, receiving such foreign direct investment, is not engaged or shall not engage in sectors/activities pertaining to defence, space and atomic energy and sectors/activities prohibited for foreign investment.](2)A registered Foreign Institutional Investor (FII) may purchase [shares or convertible debentures or warrants] [Substituted for the words "shares or convertible debentures" by Notification No. G.S.R. 436 (E), dated 30.6.2014 (w.e.f. 8.11.2005)] of an Indian company under the Portfolio Investment Scheme, subject to the terms and conditions specified in Schedule 2 : [and the limits and margin requirements prescribed by RBI/SEBI as well as the stipulations regarding collateral securities as specified by the Reserve Bank from time to time.] [Inserted by Notification No. G.S.R. 821 dated 7.3.2012 (w.e.f. 8.5.2000)][* * *] [Proviso omitted by G.S.R. 504(E), dated 22.7.2005 (w.e.f. 25.7.2005).][Provided further that Foreign Institutional Investors shall not invest in the paid up equity capital of Asset Reconstruction Companies.] [Inserted by G.S.R. 413(E), dated 9.6.2006 (w.r.e.f. 8.11.2005).](3)[(i) A Non-Resident Indian (NRI) may acquire securities or units on a Stock Exchange in India on repatriation basis under the Portfolio Investment Scheme, subject to the terms and conditions specified in Schedule 3.(ii)A Non-Resident Indian (NRI) may acquire securities or units on a non-repatriation basis, subject to the terms and conditions specified in Schedule 4.][Provided that NRI/OCB shall not purchase shares or convertible debentures of an Indian company which is engaged in the print media sector.] [Inserted by Notification No. G.S.R. 182 (E) dated 16.2.2001 (w.e.f. 8.5.2000)](4)[ A non-resident Indian or a registered FII or a Foreign Central Bank [or a OFI or any other person resident outside India included in Schedule 5] [Substituted by G.S.R. 712(E), dated 17.10.2007 (w.e.f. 14.11.2007).] may purchase securities, other than shares or convertible debentures of an Indian company, subject to the terms and conditions specified in Schedule 5.] [Substituted by Notification No. G.S.R. 165(E), dated 15.2.2016 (w.e.f. 8.5.2000).](5)[ A foreign venture capital investor registered with SEBI may make investment in the manner and subject to the terms and conditions specified in Schedule 6:] [Substituted by Notification No. G.S.R. 465(E), dated 28.4.2016 (w.e.f. 8.5.2000).][* * *] [Proviso omitted by G.S.R. 504(E), dated 22.7.2005 (w.e.f. 25.7.2005).](6)[ A registered Foreign Institutional Investor (FII) having valid approval under the Foreign Exchange Regulation Act, 1973 or under the Foreign Exchange Management Act, 1999 may trade in all exchange traded derivative contracts approved by RBI/SEBI as well as the stipulations regarding collateral securities as directed by the Reserve Bank from time to time.] [Substituted words "A registered Foreign Institutional Investor (FII) having valid approval under FERA, 1973 or under FEMA, 1999 may trade in all exchange traded derivative contracts approved by SEBI from time to time subject to the limits as prescribed in by SEBI" by Notification No. G.S.R. 896 (E), dated 22.8.2008 (w.e.f. 31.12.2007)](7)A Non-Resident Indian (NRI) may invest in exchange traded derivative contracts, approved by SEBI from time to time out of INR funds held in India or non-repatriable basis subject to the limits prescribed by SEBI. Such investments will not be eligible for repatriation benefits.] [Substituted by G.S.R. 436 (E), dated 30.6.2014 (w.e.f. 8.11.2005)](7A)[ A QFI may purchase equity shares of an Indian company subject to the terms and conditions specified in Schedule 8.] [Inserted by Notification No. G.S.R. 795 (E) dated 19.10.2012 (w.e.f. 13.1.2012)][Explanation: For the purposes of sub-regulations (1) to (7) above, no class of investor referred to in those sub-regulations shall make investment, directly or indirectly, in any security, issued by an Indian company which is engaged or proposes to engage in any of the activities in which foreign investment is prohibited under sub-regulation (b) of Regulation 4 of the Foreign Exchange Management (Permissible Capital Account Transactions) Regulations, 2000, as amended from time to time.] [Inserted by Notification No. G.S.R. 795 (E) dated 19.10.2012 (w.e.f. 13.1.2012)](8)[ A registered Foreign Institutional Investor (FII) including SEBI approved sub-accounts of the Fils, registered with SEBI· or a Non Resident Indian (NRI) may purchase, hold or sell Indian Depository Receipts (IDRs) of eligible companies resident outside India and issued in the Indian capital market, subject to the terms and conditions specified in Para 2 of Schedule 7.] [Inserted by Notification No. G.S.R. 606 (E) dated 7.3.2012 (w.e.f. 8.5.2000).](9)[ A person resident outside India (other than a citizen of Pakistan or Bangladesh) or an entity incorporated outside India (other than an entity in Pakistan or Bangladesh), not being a Foreign Portfolio Investor or Foreign Institutional Investor or Foreign Venture Capital Investor registered in accordance with SEBI guidelines, may contribute foreign capital either by way of capital contribution or by way of acquisition/ transfer of profit shares in the capital structure of an LLP under Foreign Direct Investment, subject to the terms and conditions as specified in Schedule 9.] [Substituted by Notification No. G.S.R. 188(E), dated 3.3.2017 (w.e.f. 8.5.2000).]
