Banks shall be “free to permit their branches to administer the scheme for NRIs”

The Reserve Bank of India, on Tuesday, simplified rules governing portfolio investments such as equity and debt by non-resident Indians (NRIs) to attract inflow of foreign currency.

Under the portfolio investment scheme (PIS) for NRIs, banks were given a unique code for each branch, making it cumbersome for them to administer the scheme.

The RBI has now dispensed with the unique code for branches, and said banks shall be “free to permit their branches to administer the PIS scheme for NRI.’’

The designated branch of the bank will grant a one-time permission to the NRI applicant for the purchase and sale of shares or convertible debentures of an Indian company, the RBI said in a notification.

“Two distinct permission letters (for repatriation basis and non-repatriation basis) shall be issued as per the prescribed format,” the RBI said.

“The designated branch will open a separate sub-account of NRE/NRO account (opened and maintained by an NRI in terms of the Foreign Exchange Management (Deposit) Regulations, 2000) for the exclusive purpose of routing the transactions under PIS on behalf of an NRI,” it said.

“In case, where an NRI is eligible to make investment in India, his resident power of attorney holder can be permitted by AD bank to operate NRE(PIS)/NRO (PIS) account to facilitate investment under the scheme,” it added.

Shares or debentures purchased will be held and registered in the name of the NRI.

It also said shares or debentures acquired by the NRI under the scheme will not be pledged for giving loan to a third party without prior permission of the RBI.

Bank will sensitise the branches administering the PIS scheme to ensure that NRIs are not allowed to invest in any Indian company which is engaged or proposes to engage in the business of chit fund, nidhi company, agricultural or plantation activities, it said.

They cannot invest in real estate business excluding development of townships, construction of residential or commercial premises, roads or bridges, educational institutions, recreational facilities, city and regional level infrastructure, townships, the RBI added.