Jayesh Patel

Notification No. FEMA 20 /2000-RB dated 3rd May 2000
SCHEDULE 2

{ See Regulation 5 (2) }

Purchase/sale of shares and/or convertible debentures of an Indian company by a registered Foreign Institutional Investor under Portfolio Investment Scheme

1.

Purchase/sale of shares and/or convertible debentures

(1)

A registered Foreign Institutional Investor (FII) may, through the Securities and Exchange Board of India, apply to the Reserve Bank for permission to purchase the shares and convertible debentures of an Indian company under Portfolio Investment Scheme. The permission may be granted by Reserve Bank subject to such terms and conditions as may be considered necessary.

(2)

The registered FII permitted by the Reserve Bank under sub-paragraph 1, shall purchase the shares/convertible debentures of an Indian company through registered brokers on recognised stock exchanges in India.

(3)

The amount of consideration for purchase of shares / debentures shall be paid out of inward remittance from abroad through normal banking channels or out of funds held in an account maintained with the designated branch of an authorised dealer in India, in accordance with these Regulations.

(4)

The total holding by each FII/SEBI approved sub-account of FII shall not exceed 10% (ten per cent) of the total paid-up equity capital or 10% (ten per cent) of the paid-up value of each series of convertible debentures issued by an Indian company and the total holdings of all FIIs/sub-accounts of FIIs put together shall not exceed 24 per cent of paid-up equity capital or paid up value of each series of convertible debentures.

Provided that the limit of 24 per cent referred to in this paragraph may be increased to 40 per cent by the Indian company concerned by passing a resolution by its Board of Directors followed by passing of a special resolution to that effect by its General Body.

Explanation:

For arriving at the ceiling on holdings of FIIs, shares/ convertible debentures acquired both through primary as well as secondary market will be included. However, the ceiling will not include investment made by FII through off-shore Funds, Global Depository receipts and Euro-Convertible Bonds.

(5)

A registered FII may also be permitted to purchase shares/ convertible debentures of an Indian company through private placement/ arrangement, subject to the ceilings specified in sub-paragraph (4) of this paragraph.

2.

Maintenance of account by a registered FII for routing transactions of purchase and sale of shares / convertible debentures

The Reserve Bank may, on application, permit a registered Foreign Institutional Investor to open a Foreign Currency Account and/or a Non-resident Rupee Account with a designated branch of an authorised dealer for routing the receipt of and payment for transactions relating to purchase and sale of shares / convertible debentures under this Scheme, subject to the following conditions:-

i)

The account shall be funded by inward remittance through normal banking channels or by credit of sale proceeds (net of taxes) of the shares / convertible debentures sold on stock exchange.

ii)

The funds in the account shall be utilised for purchase of shares / convertible debentures in accordance with the provisions of paragraph 1 of this Scheme or for remittance outside India.

iii)

The funds from Foreign Currency Account of the registered FII may be transferred to Non-Resident Rupee account of the same FII and vice a versa.

3.

Remittance of sale proceeds of shares / convertible debentures

The designated branch of an authorised dealer may allow remittance of net sale proceeds (after payment of taxes) or credit the net amount of sale proceeds of shares / convertible debentures to the foreign currency account or a Non-resident Rupee Account of the registered Foreign Institutional Investor concerned.

4.

Investment by certain other investors

(1)

Reserve Bank may, subject to such terms and conditions as it may consider necessary permit a domestic asset management company or portfolio manager who is registered with SEBI as a foreign institutional investor for managing the funds of a sub-account, to make investment under the Scheme on behalf of:-

(i)

a person resident outside India who is a citizen of a foreign state ,or

(ii)

a body corporate registered outside India ,

Provided such investment is made out of funds raised or collected or brought from outside India through normal banking channel,

(2)

The application to Reserve Bank for permission under sub-paragraph (1) may be made through SEBI.

(3)

Investments permitted to be made under sub-paragraph (1) shall not exceed 5% (five per cent) of the total paid-up equity capital or 5% (five per cent) of the paid-up value of each series of convertible debentures issued by an Indian company, and shall also not exceed the over-all ceiling specified in sub-paragraph (4) of paragraph 1 of this Schedule.

SCHEDULE 5

[ See Regulation 5 (4) ]

Purchase and sale of securities other than shares or convertible debentures of an Indian company by a person resident outside India.

1.

Permission to Foreign Institutional Investors for purchase of securities

A registered Foreign Institutional Investor may purchase, on repatriation basis, dated Government securities/treasury bills, non-convertible debentures/bonds issued by an Indian company and units of domestic mutual funds either directly from the issuer of such securities or through a registered stock broker on a recognised stock exchange in India;

Provided that

i)

the FII shall restrict allocation of its total investment between equity and debt instruments (including dated Government Securities and Treasury Bills in the Indian capital market) in the ratio of 70:30, and

ii)

if the FII desires to invest upto 100 per cent in dated Government Securities including Treasury Bills, non-convertible debentures/bonds issued by an Indian company, it shall form a 100% debt fund and get such fund registered with SEBI.

2.

Permission to Non-resident Indian and Overseas Corporate Body for purchase of securities

(1)

A Non-resident Indian or an Overseas Corporate Body may, without limit, purchase on repatriation basis,

i)

Government dated securities (other than bearer securities) or treasury bills or units of domestic mutual funds;

ii)

bonds issued by a public sector undertaking(PSU) in India;