Investment by NRI on Repatriation Basis and Non-Repatriation Basis

Government of India has provided special treatment to NRIs for providing flexibility to invest through different commercial feasible structures under the extant Consolidated FDI Policy of 2017 (“FDI Policy”) and the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017 (“TISPRO Regulations”) issued by the Reserve Bank of India (“RBI”), without losing their status and benefits available as ‘non-residents’. TISPRO Regulations allow NRI investors to invest in India, either on a repatriation basis or non-repatriation basis. So, what is repatriation or non-repatriation mode of investment?

1. Two Options of Investments 

For all investments in mutual funds made through the money remitted from abroad, the redemption proceeds can be remitted back to the originating account (NRE or FCNR) and can be repatriated. Such investments are called Repatriable investments. On the other hand, investments made in mutual funds secured through the money sourced from an NRO account cannot be taken outside India and have to be retained in India such investments are called Non-Repatriable Investments.

2. Which is Better?

The benefit of making an investment on a non-repatriation basis lies in the fact that the investments so made are considered as domestic investments and can be made without any limit, in contrast to the investment made on a repatriation basis, where the investor has to adhere to the sector guidelines.

3. Transfer of Share

Repatriation basis: The transfer can be made to any person resident outside India on a repatriation basis. The transfer shall be made under schedule 1 of TISPRO and shall be subject to the sectoral caps and the filing requirements with RBI.

Non-Repatriation basis: As a sale to any other NRI or OCI or as a gift to any other NRI or OCI who agrees to hold the instruments on a non-repatriation basis.

4. Permission to Invest

• On Repatriation Basis, NRIs may invest in the following:

a. Government dated securities / Treasury bills

b. Units of domestic Mutual funds

c. Bonds issued by a Public Sector Undertaking (PSU) in India

d. Non-convertible debentures of a company incorporated in India

e. Perpetual debt instruments and debt capital instruments issued by Banks in India

f. Shares in Public Sector Enterprises being disinvested by the Government of India provided the purchase is in accordance with the terms and conditions stipulated in the notice inviting bids

g. Shares and convertible debentures of Indian companies under FDI scheme (including automatic route & FIPB)

h. Shares and convertible debentures of Indian companies through stock exchange under Portfolio Investment Scheme

• On Non-repatriation Basis, NRIs may invest in the following:

a. Government dated securities/Treasury bills

b. Units of domestic Mutual funds

c. Units of Money Market Mutual Funds

d. National Plan/Savings Certificates

e. Non-convertible debentures of a company incorporated in India

f. Shares and convertible debentures of Indian companies through stock exchange under Portfolio Investment Scheme

g. Exchange-traded derivative contracts approved by the SEBI, from time to time, out of INR funds held in India on a non-repatriable basis, subject to the limits prescribed by the SEBI

The information provided in this article is generic in nature and for informational purposes only. It is in no manner can act as a substitute for specific advice in your own circumstances. We strongly recommend you to seek professional guidance pertaining to your query or doubt.