2.2.1.2 Restricted Areas for FDI FDI is subject to an approval from the Government of India in the following cases
( i) Activities / items that require an Industrial License;
( ii) Proposals for acquisition of shares in an existing Indian company in financial services sector and where Securities and Exchange Board of India( Substantial Acquisition of Shares and Takeovers) Regulations, 1997 is attracted( iii) All proposals exceeding the sectoral caps or in sectors where FDI is not permitted 2
There are ceilings on investment in certain sectors / activities. These limits are called sectoral caps 3 and FDI is not permitted beyond specified caps, unless an approval is obtained. For instance, activity of publishing newspapers and periodicals( print media sector) is restricted by a sectoral cap of 26 per cent. Effectively, a foreign investor would be allowed to invest up to 26 per cent equity in the proposed print media business.
FDI policy is reviewed on an ongoing basis and changes in sectoral cap are notified through press notes by the SIA, Department of Industrial Policy & Promotion. FDI policy is also notified by the RBI.
2.2.1.3 Approval Route
FDI in activities not covered under the automatic route requires prior government approval. Applications are considered by the FIPB which is a specially empowered board chaired by the Secretary, Ministry of Finance. Composite proposals involving foreign investment and foreign technical collaboration are also considered by the FIPB. Application for FDI cases, except NRI investments and EOUs, are to be submitted with the FIPB Unit, Department of Economic Affairs, Ministry of Finance situated at New Delhi.
Once an Indian company has the foreign investment approval from the FIPB, they do not require any further clearance from the RBI to receive inward remittance or to issue shares to the foreign investors. The company is simply required to inform the concerned regional office of the RBI on receiving remittance towards share application and issuing shares to the foreign investor 4.
2
Schedule 3
3
Schedule 3
4
Refer section 3.1.5
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