Introduction

With an estimated USD 35 billion worth FDI in its kitty during 2014, the government is eyeing a quantum jump in the foreign capital hitting Indian shores in the new year. With the ambitious ‘Make in India’ programme, launched by Prime Minister Narendra Modi in 2014, the government expects the foreign investors to bring billions worth dollars of FDI into the country. Showing its commitment to fast-track the reform process, the government has recently brought a lot of changes in the FEMA rules, regulations and guidelines.

The government, on Friday, notified the new rules for foreign direct investment in the insurance sector, allowing 49% FDI in the cash-strapped sector from 26% allowed earlier. The new rules have been notified just ahead of the Budget session, when the Modi government will try to convert the insurance ordinance and a host of other executive decrees into law.

Also, the government, in order to increase the ease of doing business in India and bring down its ranking  top 50 from the current 142nd position, has introduced the e-Biz project for single clearance window. Under the aegis of the e-Biz project, on 12th February, 2015, the government has enabled the filing of Advance Remittance Form (“ARF”) and FCGPR Form online.

This article will provide you with a detailed view on the above changes made in FDI.

FDI in Insurance Sector

• Now, foreign equity investment cap of 49% is applicable to all Indian insurance companies.
  • They shall  not  allow  the  aggregate  holdings  by  way  of  total  foreign investment in their equity shares by Foreign Investors, including portfolio investors, to exceed 49% of their paid­up equity capital
  • They shall ensure that ownership and control shall remain at all times in the hands of resident Indian entities.
  • The foreign equity investment cap of 49% shall also apply to Insurance Brokers,   Third   Party Administrators, Surveyors and Loss Assessors and other insurance intermediaries appointed under the provisions of the IRDA Act, 1999.
• Foreign Direct Investment (“FDI”) proposals up to 26% of the total paid­up equity of the Indian Insurance Company shall be allowed through the automatic route.
• FDI proposals which take the total Foreign Investment above 26 per cent and up to the cap of 49 per cent shall require FIPB approval.
• Foreign Portfolio Investment in an Indian Insurance  Company  shall  be governed  by the provisions contained in the relevant sub­-regulations/regulations  under FEMA Regulations, 2000 and provisions of the Securities Exchange Board of India (Foreign Portfolio Investors) Regulations.
• Any increase of foreign investment of an Indian insurance company shall be in accordance with the pricing guidelines specified by Reserve Bank of India under the FEMA.
• These rules shall come into force from the date of their publication in the Official Gazette.

Reporting under the FDI Scheme on e-Biz Platform

• With a view to promoting the ease of reporting of transactions under foreign direct investment, the Reserve Bank of India, under the aegis of the e-Biz project of the Government of India has enabled the filing of the following returns with the Reserve Bank of India online:
  • Advance Remittance Form (ARF) – used by the companies to report the foreign direct investment (FDI) inflow to RBI; and
  • FCGPR Form – which a company submits to RBI for reporting the issue of eligible instruments to the overseas investor against the above mentioned FDI inflow.
• Process for filing of the returns online:
  • The customer shall
    • login into the e-Biz portal,
    • download the reporting forms (ARF and FCGPR),
    • complete filling of the forms and
    • upload the filled form onto the portal using their digitally signed certificates.
  • Authorised Dealer Banks (ADs) will be
    • download the completed forms,
    • verify the contents from the available documents,
    • Call for additional information from the customer if necessary and
    • upload the verified forms for RBI to process and allot the Unique Identification Number (UIN).
• It has been decided that the ARF and FCGPR services of RBI will be operational on the e-Biz platform from February 19, 2015.
• For the present, the online reporting on the e-Biz platform is an additional facility to the Indian companies to undertake their ARF and FCGPR reporting and the manual system of reporting would continue till further notice.
• The ADs will be required to access the e-Biz portal (which is hosted on the National Informatics Centre (NIC) servers) using a Virtual Private Network (VPN) Account obtained from NIC.
• The financial aspects for obtaining/using the VPN accounts is being finalised in consultation with Government of India, DIPP and NIC. The same will be informed in due course.
• For the user manual of these two services, click on User Manual.