NRIs can make investments in new issues of shares/convertible debentures of Indian companies under direct investment schemes such as 24 per cent scheme/40 per cent scheme/ 100 per cent scheme. They can also invest in the schemes of domestic mutual funds floated by public/private sector institutions/companies, and bonds issued by public sector undertakings. Non-resident investors are required to apply for permission to invest but the company concerned will have to obtain permission from the Reserve Bank of India (RBI).

What is the 24 per cent scheme?

Under the 24 per cent scheme, Indian companies engaged or proposing to engage in any activity including finance, hire purchase, leasing, trading or other services, and establishment of school/colleges (except agricultural/plantation activities) are allowed by the RBI to issue shares/debentures to NRIs with repatriation benefits to the extent of24 per cent of the new issue.

What is the 40 per cent scheme?

Under the 40 per cent scheme, Indian companies engaged or proposing to engage in the following activity are allowed by the RBI to issue shares/debentures to NRIs with repatriation benefits to the extent of 40 per cent of the new issue:

(a) Industrial manufacturing units
(b) Hotels with 3, 4 or 5-star category
(c) Hospitals and diagnostic centres
(d) Shipping companies
(e) Development of computer software
(f) Oil exploration services
Is remittance of interest/dividend to NRI investors freely allowed under 24 per cent and 40 per cent schemes?

Yes. There is no ceiling or restriction on the amount of remittable dividend. Remittance of interest/dividend to NRI investors will be allowed by authorised dealers under the powers delegated to them.

What are the specified industries under the 100 per cent scheme?

Under the 100 per cent scheme, NRIs are permitted to invest in high priority industries listed inAnnexure III to the Statement on Industrial Policy dated July 24, 1991, of the Government of India up to 100 per cent of the new issue.

Is dividend/interest earned in respect of investments made under the 100 per cent scheme freely remittable to the NRIs abroad?

Dividend/interest can be remitted freely except in the case of consumer goods industries where the outflow on account of dividend is required to be balanced by export earnings of the company either in the year of declaration of dividend or in the years prior to the declaration of dividend. This requirement is enforced for a period of seven years from the commencement of commercial production.

How does an NRI obtain permission of the RBI for investment under 24 per cent or 40 per cent or 100 per cent scheme?

The NRI investor need not apply to the RBI. Application for necessary permission under the schemes should be made by the Indian company/firm to the central office of the RBI, Mumbai, in form ISD/ISD(R).

Besides the 24 percent, 40 per cent and 100 per cent schemes, is there any other scheme for investment by NRIs in the equity of Indian companies?

Yes. NRIs are permitted to undertake revival of sick industrial units by making bulk investment in them to the extent of 100 per cent either by way of purchase of existing equity shares or in the form of subscription to new equity issues.

Is the capital brought into India for revival of a sick industrial unit allowed to be repatriated?

Yes.

How can an NRI obtain permission of the RBI for investment in a sick industrial unit?

Application for necessary permission should be made by the Indian company to the central office of the RBI, Mumbai, in form RSU.

Can NRIs make investments in companies engaged in real estate development in India?

Yes. Investment up to 100 per cent in the new issue of equity shares/convertible debentures of Indian companies engaged in the following areas is allowed:

(a) Development of serviced plots and construction ofbuilt-up residential premises
(b) Real estate covering construction of residential and commercial premises including business centres and offices
(c) Development of township
(d) City and region level urban infrastructure facilities including roads and bridges
(e) Manufacture of building material
(f) Financing of housing development
The Jindals are Delhi-based Chartered Accountants.