40 Percent Investment Scheme for NRIs
The Reserve Bank of India (RBI) allows Indian companies to issue shares / debentures to Non Resident Indians (NRIs) on repatriation basis up to the extent of 40% of new issue. This scheme is also known as 40% scheme for NRIs. The companies engaged or proposing to engage in following sectors can offer the following types of shares and debentures-
- Industrial and manufacturing units
- Hotels with 3, 4 or 5 star category
- Hospitals and diagnostic centres
- Shipping companies
- Development of computer software
- Oil exploration services
Terms & conditions
The Reserve Bank of India is the governing authority for all types of financial activities taking place between NRIs and Indian Companies. Regarding 40% scheme, at present, the following terms and conditions are in effect:
- The equity shares and convertible debentures shall be issued by a company or business to NRIs and OCBs on repatriation basis only. However, total issue shall not exceed 51% of the face value of each new issue of the issuance company.
- The equity shares of company are not listed with any stock exchange.
- The equity share is active in manufacturing business which is not listed in ‘Annexure III to the Statement of Industrial Policy 1991 of Government of India’, this document is also revised by government time to time.
The 40% scheme is ideal for starting and expansion of manufacturing businesses. This is a wonderful opportunity for NRIs to start doing business in Indian manufacturing sector. The companies that meet the criteria laid down by RBI may issue shares and convertible debentures to NRIs and OCBs and submit Form ISD(R) to the Regional Office of Reserve Bank of India with supporting documents and investor’s details within 30 days from the date of issue.
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