RBI has also allowed Non-Resident Indians (NRIs), persons of Indian origin (PIOs) and overseas corporate bodies (OCBs) to acquire shares of companies incorporated in India from other NRIs/PIOs/OCBs. However, NRIs/PIOs/OCBs cannot transfer shares to foreign nationals or companies incorporated outside India.

In a recent circular issued to all authorised dealers in foreign exchange, RBI gave permission to Indian companies to issue of rights/bonus shares to non-residents, on condition that the rights/bonus issue does not change the percentage of foreign equity already approved. The general permission applies only to Foreign Investment Promotion Board (FIPB) approved projects where the original project cost is not more than Rs 600 crore.

The existing shares on which the rights/bonus are proposed to be issued should be held by the non-residents with RBI permission. Also, the shares should not be issued to non-residents at a price lower than that at which shares have been offered to the resident shareholders. The rights/bonus issues to non-residents are subject to the same restrictions with regard to repatriability.

In case of foreign nationals and companis incorporated outside India, the consideration should be received by way of inward remittances through banks. For original investment made by NRIs/PIOs/OCBs on repatriation basis, the funds should be received through banking channels by way of inward remittance or by debit to the FCNR/NRE/NRO/NRSR account of NRIs/PIOs/OCBs.

RBI has permitted foreign companies to acquire shares from the Indian shareholders, who acquired such shares as signatories to the Memorandum and Article of Association. This permission is restricted to 100 per cent subsidiary of foreign companies in India and the number of such shares does not exceed 500. The face value of the shares to be transferred should be less than 0.1 per cent of the paid-up capital of the Indian company.