Guidelines for Calculation of Total Foreign Investment

Department of Industrial Policy and Promotion (DIPP) had on 13th February, 2009 issued two press notes i.e. Press Note 2 & 3 (2009) stating Guidelines for calculation of total foreign investment in Indian companies, transfer of ownership and control of Indian companies and downstream investment by Indian companies. The same has been incorporated in FEMA regulations for FDI vide Notification No.FEMA.278/2013-RB dated June 07, 2013.

Now the Reserve Bank of India (RBI) has vide A.P. (DIR SERIES) CIRCULAR NO. 01 DATED JULY 04, 2013 provided for the one time reporting mechanism in respect of the calculation of the total foreign investment (Direct and Indirect) in respect of the press notes issued by DIPP and incorporated n the FDI Policy. The reporting with respect to the foreign investments made between 13th February,
2009 and 7th June, 2013 (inclusive of both dates) which are not in compliance with the regulatory framework prescribed by RBI pursuant to the aforesaid circular, is mandatory and must be done through the authorized dealer within 90 days of the date of the circular i.e. by 2nd October, 2013.

Reserve Bank shall consider treating such cases as compliant with these guidelines within a period of 6 months or such extended time as considered appropriate by RBI in consultation with Government of India.

The guidelines which have been incorporated by RBI in its regulations basically provide for:
    1. Definitions for 'Control' and 'Ownership' of the company either by an Indian resident or foreign resident, downstream investment and indirect foreign investment
    2. When investment would be counted as direct investment or indirect investment
    3. Calculation of the percentage of foreign investment into an Indian company
    4. Guidelines for establishment of Indian companies and transfer of ownership or control of Indian companies, from resident Indian citizens and Indian companies to non-resident entities, in sectors with caps
    5. Downstream investment by an Indian company which is not owned and/or controlled by resident entity/ies
    6. The aforesaid guidelines have been explained below for better understanding:

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