Foreign Exchange Management

Act, 1999

PGP - 2021-23
 FEMA, 1999
When a business enterprise :

1. Imports goods from other countries (Oil);

2. Exports its products (goods (automobile) or services (IT)) to
them;
3. Makes Investment abroad (ODI) (Tata purchased JLR);
https://www.ibef.org/economy/indian-investments-abroad
4. Receive investment from abroad (FDI / FPI) (Walmart
acquired Flipkart) ;
5. Raises money from abroad (ECB / ADR / GDR / Foreign
Denominated Shares / loans) ;

It deals in Foreign Exchange.

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FEMA, 1999

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 FEMA, 1999
India had for a long time adverse balance of payment
position in International trade i.e., imports more than
exports; due to which there was shortage of foreign
exchange in India.
Year Export Import Negative Trade
Balance
2019 $ 323 billion $ 478 billion $ 155 billion

2020 $ 275 billion $ 367 billion $ 92 billion

Source: https://trendeconomy.com/data/h2/India/TOTAL

PGP - 2021-23
 FEMA, 1999
Inflow Outflow

Inward Remittances (Indian working

Outward Remittances
abroad sending Foreign Exchange)
Export Receivables (IT Cos. / Pharma Payments relating to Imports
Co.) (Oil from Middle East)
Payments like commission,
Receipt like commission, consultancy
consultancy fees, legal fees,
fees, legal fees, etc.
etc.
Tourists’ income (Foreigners Visiting) Tour/Travel related expenses
Foreign Aids / Loans / Borrowings
by Companies in India etc. (ECB /
Loan repayments / servicing
Indian Cos. Raising money from LSE/
of loans
NYSE / NASDAQ)
PGP - 2021-23
 FERA, 1947 / 1973 FEMA, 1999
Difference between FERA & FEMA, 1999
FERA was made, when India did not Enacted after the process of liberalization
have good amount of foreign was started in India.
exchange reserve.
An Act to Regulate inflow and Management of Foreign Exchange.
outflow of Foreign Currency, foreign Provisions related to FE is liberalized so as to
payments, purchase of foreign simplify foreign trade and payments.
security and purchase of
immovable assets by a foreign Aims to promote foreign payments, export,
national in India. encourage investment from outside India for
the development of the country.
Violation of FERA was a Criminal Violation of FEMA is a Civil Offence (fine or
Offence with mens rea imprisonment).
(imprisonment). ED had the power
to arrest without an arrest warrant.
Prior approval of RBI required with No requirement of prior approval of RBI.
regard to transfer of foreign
exchange.
Accused is considered guilty and he PGP
Burden
- 2021-23 lies on FEMA officers to prove the
 FEMA, 1999
Year Foreign Exchange Reserves

1947 $2 billion

1991 $1.1 billion

2015 $337 billion

February 11, 2022 $630.19 billion

(rbi.org.in)
PGP - 2021-23
 FEMA, 1999
Country Foreign Exchange Reserves
China (July 2021) $3371.608 billion
Japan (July 2021) $1386.504 billion
Switzerland, (July, 2021) $1086.371 billion
India (February 11, 2022) $630.19 billion
Russia (July, 2021) $615.600 billion
Taiwan (July, 2021) $543.080 billion
Hong Kong (June, 2021) $491.600 billion
South Korea (July, 2021) $458.700 billion
Saudi Arabia (June, 2021) $445.657 billion
Singapore (July, 2021) $407.736 billion
Brazil (July, 2021) PGP - 2021-23 $355.671 billion
 FEMA, 1999
FEMA, 1999 was enacted by the Parliament, taking into
consideration the developments such as substantial
increase in foreign exchanges reserves, growth in
foreign trade, rationalization of tariffs, current account
convertibility etc.,

PGP - 2021-23
 FEMA, 1999
The Object of the Act is to facilitate external trade &
payments and for promoting the orderly
development & maintenance of Foreign Exchange
markets in India.

It is the Central Legislations which deals with inbound

investments into India and outbound investments
from India and trade and business between India and
the other countries.

The Act aims to boost foreign trade and investment.

PGP - 2021-23
 FEMA, 1999

FEMA Deals in

Free Dealings in
Transactions on Capital Account Foreign Adjudication of
Current Account Transactions. Exchange Offences –
subject to Appeal
Realization of through
reasonable export proceeds Authorized
restrictions that Person
may be imposed

PGP - 2021-23
 FEMA, 1999
Reserve Bank of India is the overall controlling
authority in respect of FEMA.

Enforcement of FEMA has been entrusted to

“Directorate of Enforcement (ED).”

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FEMA, 1999

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 Extra Territorial Jurisdictions
This Act extends to the whole of India.

It also applies to all branches, Offices & agencies

outside India, which is owned & controlled by a
person resident in India.

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 Overall Scheme of FEMA
FEMA makes provisions in respect of dealings in
foreign exchange.

FEMA envisages that RBI will have a controlling

role in management of foreign exchange.

FEMA also makes provisions for enforcement,

penalties, adjudications and appeals.

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 Spread of Provisions of FEMA
Provisions of FEMA cannot be found at one place but
are spread over at different places.

The FEMA, 1999 contains only the basic legal

framework.

The practical aspects are covered in rules made by

the Central Government and regulations made by the
RBI.

https://rbi.org.in/home.aspx

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 Spread of Provisions of FEMA
FDI Policy announced by Department of Industrial Policy &
Promotion, Ministry of Industries and Commerce are directly
relevant to understanding the provisions of FEMA.
https://dipp.gov.in/
https://dipp.gov.in/policies-rules-and-acts/policies/foreign-
direct-investment-policy
FDI_Factsheet_June2021.pdf

Instructions/Guidelines etc. of Ministry of Finance and

Securities and Exchange Board of India (SEBI) become relevant
when (ECB) /ADR/GDR and capital market is involved.
Case Study 1 - 4

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Master Circular of RBI

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 Master Circular of RBI
RBI has evolved a very good system of “Master Circulars.”

Theses are consolidated instructions on a particular subject.

The overall Regulatory framework of FEMA Act, 1999 consists of:

1. Act (FEMA Act, 1999)

2. Regulations,
3. Circulars
4. Press Notes
5. Press Releases
6. Clarifications

https://www.rbi.org.in/
https://www.rbi.org.in/Scripts/NotificationUser.aspx
https://www.rbi.org.in/Scripts/BS_ViewMasterCirculardetails.aspx?did=335
PGP - 2021-23
100% FDI in Single Brand Retail Trading
Government through a Press Note 4 (2019 Series)
has allowed 100% (Automatic) in FDI with
conditions.

Products to be sold under “Single Brand” (Ikea

Furniture / Levi’s / Starbucks / Louis Vuitton bags
/ Cartier watches)

Sourcing of 30% of Value of goods procured from

India
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Definition

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 Review of FDI policy for curbing opportunistic
takeovers/acquisitions of Indian cos.
Government issued a Press Note 3 (2020 Series)
which states –

An entity of a country, which shares land border

with India or where the beneficial owner of an
investment into India is situated in or is a citizen
of any such country, can invest only under the
Government route.

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Master Circular of RBI

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Master Circular of RBI

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Master Circular of RBI

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Master Circular of RBI

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Master Circular of RBI

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Structure of FEMA

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Structure of FEMA

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 Structure of FEMA
The legislations, rules and regulations, governing Foreign
Exchange Management are as under:

1. FEMA, 1999
2. Rules made my Ministry of Finance under Section 46 of FEMA
(subordinate or delegated legislation)
3. Regulations made by RBI under section 47 of FEMA
(Subordinate or delegated Legislations)
4. Master Direction issued by RBI every year
5. Foreign Direct Investment policy issued by Department of
Industrial Policy and Promotion (DIPP)
6. Notifications and Circulars issued by Reserve Bank of India.
7. SEBI Regulations on ECB, ADR, GDR

PGP - 2021-23
 Regulations Made by RBI
FEM (Acquisition and Transfer of Immovable Property Outside India)
Regulations, 2015

FEM (Acquisition and Transfer of Immovable Property in India)

Regulations, 2000
FEM (Establishment in India of Branch office or a Project office or any
other Place of Business) Regulations, 2016

FEM (Export of Goods and Services) Regulations, 2015

FEM (Investment in Firm or Proprietary Concern in India) Regulations,

2000
FEM (Manner of Receipt and Payment) Regulations, 2016
FEM (Permissible Capital AccountPGPTransactions)
- 2021-23 Regulations, 2000
 Definition
Authorized Persons
RBI cannot do all transactions in foreign exchange itself.

Hence, RBI delegates its powers to the AP with suitable guidelines, to

deal in foreign exchange & foreign securities.

Sec 2 (c) : “An authorized dealer, money changer, off shore banking
unit or any other person authorized to deal in FE / Foreign Security.”

These are authorized by RBI under Sec 10 of FEMA to deal in foreign

exchange.
The objective is to widen the access of foreign exchange facilities to
residents and tourists.
https://www.rbi.org.in/Scripts/category.aspx

PGP - 2021-23
 Definition

Authorized Dealer Category I

Generally, All Nationalized Banks, leading non-nationalized banks and foreign

banks are appointed as AD category I to deal in foreign exchange.

They can deal in all kinds of foreign exchange transactions whether current or
capital account transactions.

https://www.rbi.org.in/Scripts/bs_viewcontent.aspx?Id=309

https://rbidocs.rbi.org.in/rdocs/FEMAMASTER/PDFs/1061.PDF

https://www.indianeconomy.net/splclassroom/who-are-authorised-dealers/

PGP - 2021-23
 Definition
Authorized Dealer Category II

This category of Authorized Dealer can issue a foreign exchange for (non-trade related
current account transactions):

1. Private visits and business visits

2. Remittances of tour operators
3. Participation of International events, global conferences
4. Medical treatment abroad
5. Overseas education
6. Remittance of examination fees for GRE, TOEFEL, etc.
7. Employment and overseas Job applications
8. Emigration and emigration consultancy fees
9. Visa fees

https://www.buyforex.com/foreign-currency-exchange/canadian-dollar-cad

https://www.rbi.org.in/Scripts/CategoryII.aspx

http://www.ebixcashworldmoney.com/

PGP - 2021-23
 Definition
Money Changers (Authorized Dealer Category III)
RBI may provide license to work as Authorized Money Changers
(AMC).
https://rbi.org.in/scripts/FAQView.aspx?Id=54
https://www.rbi.org.in/Scripts/FFMCList.aspx
Authorized
Money
Changers

Full Fledged Restricted

Money Money
Changers Changers

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Definition

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 Definition

Full Fledged Money Changers

Full Fledged Money Changers are authorized by RBI ONLY to –

1. Purchase foreign currency in form of Traveller’s cheques/notes/

coins
2. Sale foreign currency in form of coins and notes

Money changers can only deal in coins, notes & traveler’s cheques.

PGP - 2021-23
 Definition
Restricted Money Changers

Some large hotels and shops, leading travel agencies are appointed as
RMC.

RMC can only purchase foreign currency and accept traveler's cheques.

Such acceptance may be for accepting value of goods/services sold by

them or even for converting into rupee.

However, RMCs cannot sell foreign exchange.

https://www.buyforex.com/buy-forex-online
PGP - 2021-23
Definition

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 Definition
Dealing in Foreign Exchange: Section 3

Only an Authorized Person shall Sale or Purchase any foreign

exchange or foreign security to any person or make any payment to
or credit of any person resident outside India or receive any
payment on behalf of any person resident outside India.

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 Definition

Non Resident Indian (NRI)

NRI means an “individual resident outside India who is a Citizen of

India.

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 Definition
Person of Indian Origin (PIO)

PIO means a citizen of any country other than Bangladesh or

Pakistan, if :

1. He at any time held an Indian passport (Sundar Pichai?); or

2. He or either of his parents or any of his grandparents was a
citizen of India (Rishi Sunak?); or
3. The person is a spouse of an Indian citizen or of a person
referred at (a) & (b) (Nick Jonas? / Shoaib Malik?)

PGP - 2021-23
 Facilities available to NRI / PIO
1. Investment in Repatriation or Non-Repatriation transaction (Except Public
Provident Fund). They can repatriate upto USD 1 million per year

On repatriation basis (proceed which can be transferred outside India), they can
invest in:
a. FDI
b. Shares and Debentures of Indian companies;
c. Government Securities;
d. Deposits in Indian Companies, NBFC, Housing Finance Companies

On Non-Repatriation basis (cannot be transferred outside India), they can invest

in Capital of Partnership firm or proprietorship firm

2. Buy and Sale of Immovable Property (any commercial or residential) in India.

(Except Plantation / Agricultural / Farm house).

https://www.rbi.org.in/scripts/BS_ViewMasCirculardetails.aspx?id=8096

PGP - 2021-23
 Facilities available to NRI / PIO
Capital Assets:
1. Sale or Purchase of Immovable Property (except Farm / Plantation /
agricultural land);
2. They can remit up to 1 Million USD per FY from sale proceeds of capital
assets in India;
Current Income:
1. They can remit outside India of current Indian income by way of rent,
interest, dividend, pension (provided tax has been paid in India).

On repatriation basis (proceed which can be transferred outside India),

NRI / PIO can invest in:
a. FDI
b. Shares and Debentures of Indian companies;
c. Government Securities;
d. Deposits in Indian Companies, NBFC, Housing Finance Companies

https://www.rbi.org.in/scripts/BS_ViewMasCirculardetails.aspx?id=8096

PGP - 2021-23
 Definition

Sec 2(v) : "Person Resident in India" means

(i) A person residing in India for more than 182 days during the
course of the preceding FY.

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 Definition
Sec 2(v) : "Person Resident in India" means

However following person will not be construed as Person resident

in India, even though they resided in India for more than 182 days:

A person who has gone outside India, for—

(a) for taking up employment outside India, or

(b) for carrying on outside India a business, or
(c) for any other purpose, which indicates his intention to stay
outside India for an uncertain period;

PGP - 2021-23
 Definition
1. If you go abroad for employment, business or
vocation, you are NRI as per FEMA from day 1 of your
departure. The period of stay in India does not matter
in this case. You may have left on March 15. You will
still be NRI from March 15 as per FEMA.

2. If you are a student leaving India to study abroad,

you are NRI from day 1 of your departure from India.
https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=2763&Mode=0

PGP - 2021-23
 Definition
Sec 2(v) : "Person Resident in India" means

However following person will not be construed as Person resident

in India, even though they resided in India for more than 182 days:

A person who has come to or stays in India, not for—

(a) for taking up employment in India, or

(b) for carrying on in India a business, or
(c) for any other purpose, which indicates his intention to stay in
India for uncertain period;

PGP - 2021-23
 Definition

1. A foreigner comes to India for tourism. He falls ill

and has to stay longer. This results in his stay
exceeding 182 days in a year.

2. The person has not come for undertaking

employment or business in India. Nor does it amount
to a situation where his stay in India is uncertain. He
will go back once he is better. Under FEMA, such a
person will be a non-resident.

PGP - 2021-23
 Definition
Sec 2(v) : "Person Resident in India" means

(ii) Any body corporate registered or incorporated in India,

(iii) An office, branch or agency in India owned or controlled by a

person resident outside India.

(iv) An office, branch or agency outside India owned or controlled

by a person resident in India.

PGP - 2021-23
 Definition

Person resident outside India

Sec 2(w) : defined "Person resident outside India" as a person who

is not resident in India.

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 Definition

Current Account Transactions

Current account transactions are those transactions which are

routinely undertaken in connection with the day to day affairs of
business.

However, these transactions should not create an asset or liability

situation.

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 Definition
Few Current Account Transactions

1. Payment for import of goods.

2. Remittance on interest on funds borrowed from abroad.
3. Remittance of dividend on foreign investment from abroad.
4. Salary to foreign nationals/directors.
5. Export commission
6. Remittance for advertisement in print/internet/TV abroad.
7. Booking for passage for foreign travel with airline or booking of cargo in
ships.
8. Remittances for living expenses of parent, spouse and children residing
abroad
9. Payments due as interest on loan /net income from investments.
10. Expenses in connection with foreign travel, education, medical care of
parent, spouse and children.
PGP - 2021-23
 Definition

Capital Account Transactions

Sec 2(e) : “Capital Account Transaction" means a

transaction which:

Creates or Alters the Assets or Liabilities outside India

of persons resident in India or assets or liabilities
in India of persons resident outside India

PGP - 2021-23
 Definition

Capital Account Transactions

Two Types of Capital Transactions:

1. Any transaction which creates assets or liabilities

outside India of a Person Resident in India;

2. Any transaction which creates assets or liabilities in

India of a Person Resident Outside India;

PGP - 2021-23
 Definition
Capital Account Transactions of Person Resident in India:

1. Investment in Foreign Shares / Debentures (Shares of

Amazon Inc.) by a Person Resident in India;
2. Foreign Currency loans raised by Person Resident in
India (Adani Enterprises raising money from HSBC, UK);
3. Transfer of Immovable Property outside India by a
Person Resident in India (Indian Co. buying Office in
Australia);

PGP - 2021-23
 Definition

Capital Account Transactions of Person Resident Outside

India in following:

1. Investment in Shares of Indian Companies (Walmart

buying shares in Flipkart / Amazon buying shares of Future);

2. Acquisition or Transfer of Immovable Property in India

by a Person Resident outside India (Foreigner buying flat
in Goa);

PGP - 2021-23
 Liberalised Remittance Scheme
Launched in 2004, to facilitate resident individuals
to freely remit funds abroad for any Current or
Capital Account Transactions

Initially, the limit was 25,000 USD per Year. Over

the years it has been increased.
Now the limit is 2,50,000 USD per Year (INR 19 Cr.)

https://www.rbi.org.in/commonperson/English/Scripts/FAQs.aspx?Id=1834

PGP - 2021-23
LRS for Individuals – Maximum 2,50,000 USD Per Year

Attending
Conference
Seminars
Gifts / Medical
Donations Treatment

Going abroad Current

Study
for Account
Abroad
employment Transactions

Maintenance
of Close Emigration
Relatives Private
Visit to
any
PGPcountry
- 2021-23
LRS for Individuals – Maximum 2,50,000 USD Per Year

Purchase of
property
abroad

Setting up a Making foreign

WOS or JV Capital investments in
outside India for Account equity shares,
any business Transactions debt instruments,
purpose mutual funds

Extending loans to
Non-Resident
Indians who are
relatives
PGP - 2021-23
 Current Account Transactions
Purpose Foreign Exchange Limit (Other than
Individuals)
Reimbursement of Pre- Up to USD 1,00,000
incorporation Expenses

Consultancy Services USD 10,00,000 per projects

for Infrastructure
Projects

Consultancy Services USD 1,00,000 per projects

for other than
Infrastructure Projects

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PGP - 2021-23
PGP - 2021-23
PGP - 2021-23
 Current & Capital A/c Transactions
Capital Account transactions are deemed to be
prohibited unless permitted while current account
transactions are deemed to be permitted unless
prohibited.

https://rbi.org.in/Scripts/NotificationUser.aspx?Id=1
0192&Mode=0

Only a person resident in India can acquire

immovable property in India.

Case Study 5 & 6

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Foreign Investment in India

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 Foreign Investment in India
Foreign Investment
in India

Foreign Direct Foreign Portfolio

Investment Investments

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 Foreign Portfolio
Investments

NRI/PIO FII/QFI/RFPI

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PGP - 2021-23
 Foreign Portfolio Investment
• Kinds of Investments? In shares / government bonds / corporate bonds
/ convertible securities / infrastructure securities

• Who Makes the Investment? Investment by Non-Resident called as

‘Foreign Portfolio Investors (FII, Pension Fund, Mutual Fund, Insurance
co., Asset Management Co., Banks, Investment Trusts, University
Funds, Charitable Trusts or Societies)’ – They are registered with SEBI.

• Purpose of Investment? To earn through ‘differences in equity price

scenario’, ‘bond yield’, ‘growth prospects’, ‘interest rate’, ‘dividends’ or
‘rate of return on capital shares’.

• Can they invest in Unlisted Cos.? FPIs are not allowed to invest in
unlisted shares and investment in unlisted entities will be treated as FDI.

• Passive Investments \ Very Low Control \ Short Term

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 Foreign Portfolio Investment
• Foreign Portfolio Investment means any
investment made by a person resident outside
India through capital instruments where such
investment is less than ten percent of the post
issue paid-up share capital on a fully diluted
basis of a listed Indian company.

• Total holdings of all FIIs put together shall not

exceed 24% of the paid-up capital.

• FPI upto 49% now allowed, subject to the condition that there is no
transfer of ownership from resident to non-resident.
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Foreign Direct Investment
(FDI)

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Foreign Direct Investment
(FDI)

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Foreign Direct Investment
(FDI)

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 FDI?
• FDI means investment by Non – Resident Entity /
Person Resident Outside India in the Capital of
the Indian company.

• Along with the capital, the co. brings in

knowledge, skill, and technical know-how. Hence,
they hold a good amount of control in terms of
decision-making.

• The objective is strategic long term relationship

and the degree of influence in the management
of the investee co.

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Foreign Investment in India

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 FDI?

• FDI means investment by Non – Resident

Entity / Person Resident Outside India in the
Capital of the Indian company.

• The objective is strategic long term

relationship and the degree of influence in
the management of the investee co.

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 Who can make FDI?

• Person Resident outside India or Companies

registered outside India

• Resident / Entity from Pakistan / Bangladesh –

can make investment subject to approval of
RBI

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 Who can make FDI?

• Person Resident outside India or Companies

registered outside India

• Resident / Entity from Pakistan / Bangladesh –

can make investment subject to approval of
RBI

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 Eligible Investee Entities

FDI

FDI in FDI in FDI in

Indian Co. Partnership Startup
Firm or FDI in LLP
Proprietorship
Firm
PGP - 2021-23
 Forms in which Business Can be
conducted by a Foreign Co. in India

1. Incorporate a Company :
• As a JV Co.;
• As a WOS Co.
OR
2. Set up a:
• Liaison Office
• Project Office
• Branch Office
• Representative Office

Case Study 7

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Procedure for receiving FDI in an Indian Co.

FDI

Automatic Government
Route Route

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 Automatic Route

Without Prior Approval either of the Govt. of

India (Concerned Ministry) or the RBI

In all activities/sectors as specified in the

consolidated FDI Policy

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 Government Route
• Activities not covered under Automatic
Route

• Prior Approval of Central Government

required.

• Concerned Department (Ministry) along with

DIPP (Department of Industrial Policy and
Promotion).
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 Government Route
Activity/ sector Administrative Ministry/ Department

Mining Ministry of Mines

Broadcasting Ministry of Information & Broadcasting

Civil Aviation Ministry of Civil Aviation

Telecommunication Department of Telecommunications

Trading (Single brand, Department of Industrial Policy & Promotion

Multi brand and Food
Product retail trading)
Banking (Public and Department of Financial Services
Private)
Pharmaceuticals Department of Pharmaceuticals
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Activities requiring Government Approval
Automatic approval route is not permitted for following sectors:

• Petroleum Sector
• Investing Companies in Infrastructure and Service Sector
• Defense & Strategic Industries
• Atomic Minerals
• Print Media
• Broadcasting
• Postal Services
• Courier Services
• Establishment & operation of Satellite
• Development of Integrated Township
• Tea Sector
• Asset Reconstruction Company

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 Instruments for receiving FDI?

FDI can be by way of :

• Equity
• Fully & Mandatorily Convertible Pref. shares
• Fully & Mandatorily Convertible Debentures
• Fully & Mandatorily Convertible Warrants

Within prescribed limits.

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 Reporting to RBI

• The Indian company having received FDI

either under the Automatic route or the
Government route is required to comply with
provisions of the FDI policy including
reporting the FDI to the Reserve Bank.

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 Prohibited Sector - Where FDI is not allowed

FDI in following sectors is prohibited:

• Lottery Business
• Gambling & Betting including Casinos, etc.
• Chit Fund
• Nidhi Company
• Agricultural (excluding Floriculture, Horticulture, Development of seeds,
Animal Husbandry, Pisciculture and cultivation of vegetables, mushrooms, etc.
under controlled conditions and services related to agro and allied sectors)
• Real Estate Business / Farm House (except development of
townships, roads, bridges, city)
• Manufacture of Cigars, cigarettes, of tobacco or of tobacco
substitutes etc.
• Activity /sector not opened for private sector investment
(Atomic Energy, Railways)

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 Permitted Sector
• Investment in some sectors is permitted
subject to certain restrictions and ceilings.
• Sectoral Caps: Maximum amount which can
be invested by foreign investors in an entity
and includes all types of Foreign Investments
(FDI / FPI / NRI / VI / FVCI / Investor Vehicles.)
• Total foreign investment, direct and indirect,
in an entity will not exceed the
sectoral/statutory cap.

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 Permitted Sector – With Cap
Sector % of Entry Route
Equity
/ FDI
Cap

Floriculture, Horticulture, etc. 100% Automatic

Tea / Coffee / Cardamom Plantation 100% Automatic
/ Palm Oil / Olive Oil Tree Plantation

Mining & Exploration of metal & 100% Automatic

non-metal ores

Petroleum and Natural Gas 100% Automatic

Pharmaceutical Company (GSK, 100% Automatic
Pfizer, Abbott, Roche, Novartis)
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Sector Permitted Sector %–ofWith Cap
Entry Route
Equit
y/
FDI
Cap
Broadcasting Carriage Services (DTH / 100% Automatic up to 74%
Cable Networks / Mobile TV)
Broadcasting Content Services (FM 49% Government
Radio / Up-linking of News & Current
Affairs TV Channels
Uploading/Streaming of News & 26% Government
Current Affairs through Digital Media
Defence 100% Automatic up to 74%
Print Media (Publication of newspaper 26% Government
and periodicals dealing with news and
current affairs)
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Sector
Permitted Sector%Equity
–of With Cap
Entry Route

/ FDI
Cap
Airports 100% Automatic
Courier services 100% Automatic
Hotel & Tourism Sector 100% Automatic
Industrial Parks 100% Automatic
Satellites establishment 100% Government
Private Security Agencies 74% Automatic up to 49%;
Government Route
beyond 49% and up
to 74%
Telecom Services 100% Automatic up to 49%
Government route
PGP - 2021-23
beyond 49%
Sector Permitted Sector% –of With Cap
Entry Route
Equity
/ FDI
Cap

Cash and Carry Whole sale Trading 100% Automatic

E-commerce Activities (Amazon, 100% Automatic
Uber, Big Basket) (B2B only and not
in B2C)

Single Brand Product Retailing (Ikea / 100% Automatic

Nike / Adidas / H&M)
Multi Brand Retail Trading (Reliance 51% Government
Retail/Big Basket)

PGP - 2021-23
Sector Permitted Sector% –of With Cap
Entry Route
Equity
/ FDI
Cap

Banking - Private Sector (ICICI Bank / 74% Automatic up to 49%;

HDFC Bank / Kotak Mahindra Bank / Government Route
Yes Bank / Axis Bank) beyond 49% and up to
74%

Banking – Public Sector 20% Government Route

Insurance Companies (HDFC Ergo, 74% Automatic
Apollo Munich)

PGP - 2021-23
 E-Commerce Activity

• E-commerce activities refer to the activity of

buying and selling by a company through the
e-commerce platform.

• Such companies would engage only in

Business to Business (B2B) e-commerce and
not in Business to Consumer e-commerce
(not in retail trading).

PGP - 2021-23
Overseas Direct Investments

PGP - 2021-23
Overseas Direct Investments

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 E-Commerce Activity
• 100% FDI under automatic route is permitted in
marketplace model of e-commerce.

• FDI is not permitted in inventory-based model of e-

commerce.
http://dipp.nic.in/English/acts_rules/Press_Notes/pn3_2
016.pdf

https://www.business-standard.com/article/economy-
policy/e-commerce-firms-flouting-fdi-rules-must-be-deal-
with-trade-group-121031701299_1.html

Case Study 8, 9 & 10

PGP - 2021-23
 Pricing Guidelines
Fresh Issue of Shares: Price of Shares issued to
Person Resident outside India shall be

• Listed Cos. = On the basis of SEBI guidelines

• Non Listed Companies: not less than fair value

of shares determined by a SEBI registered
Merchant Banker or a CA as per any
internationally accepted pricing methodology
on arm’s length basis

PGP - 2021-23
Investment in India and Outside India

Investment

FDI ODI

PGP - 2021-23
 Overseas Direct Investments
Contribution to the Capital of a Foreign
company by buying new shares or existing
shares

https://www.rbi.org.in/scripts/FAQView.as
px?Id=32

PGP - 2021-23
 Investment Outside India

ODI

Automatic Government
Route Route

PGP - 2021-23
 Investment Outside India

ODI

JV WOS

PGP - 2021-23
 Overseas Direct Investments
Maximum Limit of ODI

• The Indian company can invest up to the its net

worth (as per the last audited Balance Sheet) in
JV / WOS for any bonafide activity permitted as
per the law of the host country.
• The Indian company shall route all the
transactions relating to the investment in a
JV/WOS through only one branch of an
authorised dealer to be designated by the Indian
co.
PGP - 2021-23
Thank You

PGP - 2021-23