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India – Foreign Exchange Updates.

27 April, 2015



Amendments To The FDI Policy Relating To FDI In The Pharmaceutical Sector – Carve Out For Medical Devices


In furtherance of the press release dated December 24, 2014, the Department of Industrial Policy and Promotion (‘DIPP’) has issued Press Note 2 dated January 6, 2015 (‘Press Note 2’) permitting foreign direct investment (‘FDI’) up to 100% under the automatic route for manufacturing of medical devices. The Press Note 2 is effective from January 21, 2015 and specifies that the conditions applicable to the pharmaceutical sector (such as a prohibition on a ‘noncompete’ clause without the approval of the Foreign Investment Promotion Board etc.) will not be applicable to greenfield as well as brownfield projects for manufacturing medical devices. 


Corresponding amendments have been made by RBI to Schedule 1 under the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000.


Reporting Under FDI Scheme On The e-Biz Platform


With a view to promoting ease of reporting of transactions under the FDI scheme, the RBI has, by way of a circular dated February 12, 2015, enabled the filing of the advance remittance form and Form FC-GPR through its e-Biz project. Companies can now download such forms and upload them upon completion on the identified portal using their digitally signed certificates. The authorised dealer banks will be required to download the completed forms, verify the contents and then upload them for RBI to process and allot the unique identification number. This online reporting facility is to be operational from February 19, 2015. Additionally, the manual system of reporting will continue till further notice from RBI.


FDI In Insurance Sector


The Government of India promulgated the Indian Insurance Companies (Foreign Investment Rules), 2015, on February 19, 2015 (the ‘FI Rules’). Thereafter, the DIPP has, by way of Press Note 3 dated March 2, 2015 (‘PN 3’), amended the FDI Policy 2014. In terms of the FI Rules and PN 3, FDI in the insurance sector has been increased to 49%, from the earlier limit of 26%. Under the revised position, FDI up to 26% is permitted under the automatic route and FDI beyond 26%, and up to 49%, is allowed under the approval route. The aggregate foreign investments including portfolio investments are not permitted to exceed 49%.

Further, under the FI Rules and PN 3, the investment cap of 49% will apply on the same terms to insurance brokers, third party administrators, surveyors and loss assessors and other insurance intermediaries appointed under the provisions of the Insurance Regulatory and Development Authority Act, 1999. Further, the ownership and control of an insurance company is required to remain at all times in the hands of resident Indian entities. It has been clarified that where an entity like a bank, whose primary business is outside the insurance area, is allowed by the IRDA to function as an insurance intermediary, the investment caps applicable in that sector will continue to apply, subject to the condition that the revenues of such entities from their primary business must remain above 50% of their total revenues in any financial year. 


Clarification On Press Note 10 of 2014


The Department of Industrial Policy & Promotion, Ministry of Commerce & Industry issued clarifications on March 13, 2015 (‘Clarification’) in relation to the Press Note No. 10 of 2014 (which deals with review of Foreign Direct Investment policy on construction development sector). Vide the Clarification, the Ministry has, inter alia, clarified the following:

i. No new foreign direct investment can be brought in a project if the minimum capitalization of USD 5m has not been achieved within six months of commencement of the project. Further, the minimum capitalization is project specific and not company specific.

ii. An exit would be permitted with the approval of Foreign Investment Promotion Board (“FIPB”) on case to case basis even before completion of the project or development of trunk infrastructure. An exit in residential / commercial project would be permitted automatically after the completion of the project.

iii. If unused land is part of the project and trunk infrastructure has not been developed, then exit can take place with prior approval of FIPB

iv. A certificate from an architect registered with Council of Architecture certifying the completion of development of trunk infrastructure would be sufficient to prove that trunk infrastructure development is complete.

v. Transfer of shares from one person resident outside India to another prior to completion of a project or before completion of trunk infrastructure would be through FIPB route.
vi. FDI is permitted in completed project for operation and management of townships, malls/ shopping complexes and business centres as long as they do not get in the realm of real estate business.




For further information, please contact:


Zia Mody, AZB & Partners
[email protected]


Abhijit Joshi, AZB & Partners 
[email protected]

Shuva Mandal, AZB & Partners 
[email protected]


Samir Gandhi, AZB & Partners
[email protected]

Percy Billimoria, AZB & Partners 
[email protected]


Aditya Bhat, AZB & Partners 
[email protected]


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