FDI – Permissible Capital Instruments for Investing in India under FEMA

Under the existing FDI policy, the following Capital  Instruments for permissible for Investing in India under FEMA

·         Equity Shares

·         Fully, Compulsorily  and Mandatorily Convertible Preference Shares

·         Fully, Compulsorily  and Mandatorily Convertible Debentures

·         FCCB’s

·         Subscription to American / Global Depository Receipts of an Indian Company

Interest on Other type of Preference Shares/Debentures, would be denominated in Rupees and hence interest thereon has to be based on swap equivalent of LIBOR + permissible spread for corresponding maturity External Commercial Borrowings.

The Law is based on Consolidated FDI Policy Circular No.1 of 2012. Prepared by Mr. Arinjay Kumar Jain

Foreign Direct Investment - Permitted and Prohibited Sectors

 The Law is based on Consolidated FDI Policy Circular No.1 of 2012 

1.    Permitted Sectors – Investment in Permitted Sectors can be made under the following two routes : -

a.    Automatic Route

No  prior approval  required from the RBI or the GOI.  Only Reserve Bank of India needs to be informed within specified period. 

b.    Government Approval Route (‘FIPB’)

Proposals falling outside the prohibited Sectors and not falling under automatic route require prior approval of Foreign Investment Promotion Board (‘FIPB’) 

2.    Prohibited Sectors

Foreign investment is not permitted in companies engaged in prohibited sectors – Refer Para 6.1 of the Policy.