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Foreign Investment Approval Procedures

Procedure for getting approval for FDI
Getting an automatic approval for procuring 100% FDI is easy for most of the sectors / activities. Thanks to the investment-friendly policies offered by the government that allow a flexible and transparent investment environment in the country. The investment in such sectors can be made without getting prior approval from the central government.

Approvals For Foreign Equity

However, the following special sectors or activities require prior approval from the government. They have to approach the government through the Foreign Investment Promotion Board (FIPB) in order to get approval.

Sectors/activities that are not eligible for procuring FDI.
Sectors/activities that require an industrial license.
A proposal from a foreign investor who has already got collaboration with any other business in India in the same field.
A proposal from a foreign investor for acquiring the shares from an existing financial services company in India. These proposals are restricted by certain policies adopted by the Securities and Exchange Board of India (SEBI) in 1997.
Investment proposals for categories/items that do not fall under the Sectoral Policy/CAPS category.

Procedure for getting automatic approval
The only procedure in procuring automatic approval is to inform the Reserve Bank of India (RBI) through bank in which share application money has been received in the prescribed Form FC-GPR within 30 days after making the inward transfer of funds required for the business and submit all the necessary documents within a period of 30 days of issuing the shares to the investors.

Procedure for getting FIPB approval
Approval for proposals that are not covered under the automatic category, such as the composite proposals that involve foreign investment/technical collaboration, is made through FIPB route. There are two types of proposals under this procedure.

All FDI applications except the Non-Resident Indian (NRI) and 100% Export Oriented Units (EOU) have to be submitted to the FIPB, Department of Economic Affairs, Ministry of Finance.
Applications under the NRI and 100% EOU category have to be submitted to the SIA under the Department of Industrial Policy and Promotion.

Applications can be made either in the Form FC-IL (Composite form for Foreign Collaboration and Industrial License) or in a plain paper with all the details mentioned in it.

Those proposals approved by the FIPB do not require any further approval from the RBI for any kind of inward transfer of funds and issue of shares to foreign investors. However, they are supposed to intimate the Regional Office of the RBI about the inward transfer of funds or the issue of the shares to the investors within a period of 30 days.

Getting approval for External Commercial Borrowing (ECB)
There are two ways in which ECB approval can be procured – automatic route and approval route.

Industrial sectors, including the infrastructure, are approved through automatic route that does not require RBI/government approval. ECB up to US$20 million with a minimum three-year maturity or ECB up to US$500 million with a minimum five-year maturity is allowed under this category. The maximum ECB that can be raised through automatic route during a financial year is US$500 million.

To get the automatic approval, the following procedures have to be followed.

Apply in the prescribed format in Form 83, along with a duplicate, to the concerned Authorized Dealer (AD). The form has to be certified by a Company Secretary or a Chartered Accountant. The AD will forward one copy of the application to the Director, Balance of Payments Statistics Division, Department of Statistical Analysis and Computer Services (DESACS), Reserve Bank of India, for allotting the loan registration number.
After receiving the loan registration number, the borrower will be eligible to use the loan.
The borrower will have to submit the ECB-2 Return every month to the DESACS. It has to be certified by the concerned AD and should reach the DESACS within seven working days from the last day of the closing month.

The approval for all proposals other than those fall under the automatic route, are decided by an Empowered Committee under the RBI.