Government of India
Ministry of Commerce & Industry
Department of Industrial Policy & Promotion
(FC-I Section)

Press Note No. 8 (2015 Series), Dated: 30th July, 2015

Subject: Introduction of Composite Caps for Simplification of Foreign Direct Investment (FDI) policy to attract foreign investments

The Government of India has reviewed the extant FDI policy on various sectors and made following amendments in the Consolidated FDI Policy Circular of 2015, effective from May 12, 2015, by introducing composite caps, so that uniformity and simplicity are brought in across the sectors in FDI policy for attracting foreign investments.

2. Para 3.6.2 (vi) of the Consolidated FDI Policy Circular of 2015, is amended to read as under:

3.6.2 (vi) It is also clarified that Foreign investment shall include all types of foreign investments, direct and indirect, regardless of whether the said investments have been made under Schedule 1 (FDI), 2 (FII), 2A (FPI), 3 (NRI), 6 (FVCI), 8 (QFI), 9 (LLPs) and 10 (DRs) of FEMA (Transfer or Issue of Security by Persons Resident Outside India) Regulations. FCCBs and DRs having underlying of instruments which can be issued under Schedule 5, being in the nature of debt, shall not be treated as foreign investment. However, any equity holding by a person resident outside India resulting from conversion of any debt instrument under any arrangement shall be reckoned as foreign investment.

3. Para 4.1.2 of the Consolidated FDI Policy Circular of 2015, is amended to read as under:

4.1.2 For the purpose of computation of indirect foreign investment, foreign investment in an Indian company shall include all types of foreign investments regardless of whether the said investments have been made under Schedule 1 (FDI), 2 (FII holding as on March 31), 2A (FPI holding as on March 31), 3 (NRI), 6 (FVCI), 8 (QFI holding as on March 31), 9 (LLPs) and 10 (DRs) of FEMA (Transfer or Issue of Security by Persons Resident Outside India) Regulations. FCCBs and DRs having underlying of instruments which can be issued under Schedule 5, being in the nature of debt, shall not be treated as foreign investment. However, any equity holding by a person resident outside India resulting from conversion of any debt instrument under any arrangement shall be reckoned as foreign investment.

4. Para 3.1.4 (i) of the Consolidated FDI Policy Circular of 2015, is amended to read as under:

3.1.4 (i) An FII/FPI/QFI (Schedule 2, 2A and 8 of FEMA (Transfer or Issue of Security by Persons Resident Outside India) Regulations, as the case may be) may invest in the capital of an Indian company under the Portfolio Investment Scheme which limits the individual holding of an FII/FPI/QFI below 10% of the capital of the company and the aggregate limit for HI/FPI/OR investment to 24% of the capital of the company. This aggregate limit of 24% can be increased to the sectoral cap/statutory ceiling, as applicable, by the Indian company concerned through a resolution by its Board of Directors followed by a special resolution to that effect by its General Body and subject to prior intimation to RBI. The aggregate FII/FPI/QFI investment, individually or in conjunction with other kinds of foreign investment, will not exceed sectoral/statutory cap.

5. Para 6.2 of the Consolidated FDI Policy Circular of 2015 is amended to read as
under:

a) In the sectors/activities as per Annexure, foreign investment up to the limit indicated against each sector/activity is allowed, subject to the conditions of the extant policy on specified sectors and applicable laws/regulations; security and other conditionalities. In sectors/activities not listed therein, foreign investment is permitted up to 100% on the automatic route, subject to applicable laws/regulations; security and other conditionalities.

Wherever there is a requirement of minimum capitalization, it shall include share premium received along with the face value of the share, only when it is received by the company upon issue of the shares to the non-resident investor. Amount paid by the transferee during post-issue transfer of shares beyond the issue price of the share, cannot be taken into account while calculating minimum capitalization requirement.

b) Sectoral cap i.e. the maximum amount which can be invested by foreign investors in an entity, unless provided otherwise, is composite and includes all types of foreign investments, direct and indirect, regardless of whether the said investments have been made under Schedule 1 (FDI), 2 (FII), 2A (FPI), 3 (NRI), 6 (FVCI), 8 (QFI), 9 (LLPs) and 10 (DRs) of FEMA (Transfer or Issue of Security by Persons Resident Outside India) Regulations. FCCBs and DRs having underlying of instruments which can be issued under Schedule 5, being in the nature of debt, shall not be treated as foreign investment. However, any equity holding by a person resident outside India resulting from conversion of any debt instrument under any arrangement shall be reckoned as foreign investment under the composite cap. Sectoral cap is as per Annexure referred above.

c) Foreign investment in sectors under Government approval route resulting in transfer of ownership and/or control of Indian entities from resident Indian citizens to non-resident entities will be subject to Government approval. Foreign investment in sectors under automatic route but with conditionalities, resulting in transfer of ownership and/or control of Indian entities from resident Indian citizens to non-resident entities, will be subject to compliance of such conditionalities.

d) The sectors which are already under 100% automatic route and are without conditionalities would not be affected.

e) Notwithstanding anything contained in paragraphs a) and c) above, portfolio investment, upto aggregate foreign investment level of 49% or sectoral/statutory cap, whichever is lower, will not be subject to either Government approval or compliance of sectoral conditions, as the case may be, if such investment does not result in transfer of ownership and/or control of Indian entities from resident Indian citizens to non-resident entities. Other foreign investments will be subject to conditions of Government approval and compliance of sectoral conditions as laid down in the FDI policy.

f) Total foreign investment, direct and indirect, in an entity will not exceed the sectoral/statutory cap.

g) Any existing foreign investment already made in accordance with the policy in existence would not require any modification to conform to these amendments.

h) The onus of compliance of above provisions will be on the investee company.

6. It is clarified that there are no sub-limits of portfolio investment and other kinds of foreign investments in commodity exchanges, credit information companies, infrastructure companies in the securities market and power exchanges.

7 In Defence sector, portfolio investment by FP1s/FIls/NRIs/QFIs and investments by FVCIs together will not exceed 24% of the total equity of the investee/joint venture company. Portfolio investments will be under automatic route.

8. In Banking- Private sector, where sectoral cap is 74%, FII/ FPI/ QFI investment limits will continue to be within 49% of the total paid up capital of the company.

9. There is no change in the entry route i.e. Government approval requirement to bring foreign investment in a particular sector/ activity. Further, subject to the amendments mentioned in this Press Note, there is no change in other conditions mentioned in the Consolidated FDI Policy Circular of 2015 and subsequent Press Notes.

10. Relevant provisions of the FDI policy and subsequent Press Notes will be read in harmony with the above amendments in Consolidated FDI Policy Circular of 2015.

11. The above decision will take immediate effect.

(Atul Chaturvedi)

Joint Secretary to the Government of India

D/o IPP File No.: 5/7/2014-FC-I dated: 30th July, 2015

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ANNEXURE

Foreign investments caps and entry routes in various sectors as per Consolidated FDI Policy Circular of 2015

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