1. Foreign investment is of two kinds ֠
4. Reporting of Inflow
An Indian company receiving investment from outside India for issuing shares / convertible debentures / preference shares under the FDI Scheme, should report the details of the amount of consideration to the Regional Office concerned of the Reserve Bank through the Category I Authorized Dealer not later than 30 days from the date of allotment of shares in the prescribed Form along with the copy(s) of the FIRC/s evidencing the receipt of the remittance along with the KYC report in the prescribed format on the non-resident investor from the overseas bank remitting the amount in FIRMS Application Foreign investment in India - Reporting in Single Master Form
1.1 The Reserve Bank, in the First Bi-monthly Monetary Policy Review dated April 5, 2018 announced that, with the objective of integrating the extant reporting structures of various types of foreign investment in India, it will introduce a Single Master Form (SMF) subsuming all the existing reports.
1.2 In order to implement this announcement, the Reserve Bank is introducing an online application, FIRMS (Foreign Investment Reporting and Management System), which would provide for the SMF. FIRMS would be made online in two phases. In the first phase, the first module viz., the Entity Master, would be made available online. Instructions in this regard were already issued through A. P. Dir. Series Circular No. 30 dated June 07, 2018.
1.3 In the second phase, the second module containing 9 reports would be made available with effect from September 01, 2018. With the implementation of SMF, the reporting of FDI, which is presently a two-step procedure viz., ARF and FC-GPR would be merged into a single revised FC-GPR. The SMF also introduces reporting of indirect foreign investment through form DI and reporting of inflows in investment vehicles through Form InVi. Further, the reporting in FC-TRS, LLP-I, LLP-II, ESOP, DRR and CN would also be made in SMF only. The finalized structure of SMF and operational instructions thereof would be made available in the Master Direction on Reporting under FEMA, 1999.
1.4 The first module will be available to the public for data entry between June 28 (at 1:00 PM) and July 12, 2018. The date was extended till July 20, 2018. It would provide an interface for Indian entities [as defined in Foreign Exchange Management (Transfer or issue of security by a person resident outside India) Regulations, 2017 dated November 07, 2017 and as amended from time to time] to input their existing foreign investment (including indirect foreign investment) data. Entities shall provide data with respect to all foreign investments received, irrespective of the fact that the regulatory reporting to the Reserve Bank for the same has been made or not and whether the same has been acknowledged or not.
1.5 Indian entities not complying with these instructions will not be able to receive foreign investment (including indirect foreign investment) and will be treated as non-compliant with Foreign Exchange Management Act, 1999 (FEMA) and regulations made thereunder and liable for action as laid in FEMA or the regulations made thereunder.
1.6 Where the entities have not been able to register for the Entity master, they may do so from September 01, 2018. However, they may provide the reasons for not registering within the time period along with the authority letter.
5. Prohibited Sectors in FDI policy in which no Foreign Investment is allowed
I. Explanation 1:Transfer of Development Rights (TDR) is a zoning technique used to permanently protect farmland and other natural and cultural resources by redirecting development that would otherwise occur on these resource lands to areas planned to accommodate growth and development)
II. Explanation 2: Further, the real estate business shall not include development of townships, construction of residential/commercial premises, roads or bridges and real estate investment trusts (REIT).
III. Explanation 3: Foreign technology collaboration in any form including licensing for franchise, trademark, brand name, management contract is also prohibited for Lottery Business and Gambling and Betting activities
IV. Explanation 4: In terms of Regulation 4(b) (i) of Notification No. FEMA 1/2000-RB dated 3rd May 2000, no person resident outside India shall make investment in India, in any form, in a company or partnership firm or proprietary concern or any entity, whether incorporated or not, which is engaged or proposes to engage “in the business of chit fund”. But as per A. P. (DIR Series) Circular No.107 date June 11 2015, Non-Resident Indians (NRIs) to subscribe to the chit funds, without limit, on non-repatriation basis subject to the following conditions: (Exception)
F The Registrar of Chits or an officer authorised by the State Government in accordance with the provisions of the Chit Fund Act in consultation with the State Government concerned, may permit any chit fund to accept subscription from Non-Resident Indians on non-repatriation basis;
F The subscription to the chit funds shall be brought in through normal banking channel, including through an account maintained with a bank in India.
F a person who is citizen of Bangladesh /Pakistan and Entity incorporated in Pakistan / Bangladesh Can invest in Indian Company only under Government route in sectors other than defence, space, atomic energy and prohibited sectors (Reg. 15)
6. Reporting of issue of shares
After issue of shares fully, mandatorily & compulsorily convertible debentures / fully, mandatorily & compulsorily convertible preference shares, the Indian company has to file Form FC-GPR (Part A), in the prescribed format in FIRMS through the Category I Authorized Dealer within whose jurisdiction the registered office of the company is situated, not later than 30 days from the date of issue of shares along with following documents: