issue of licence for holding foreign securities
A.P. (DIR Series) (2001-2002) Circular No. 18, dated 18-12-2001
1. Under
section 19 of the Foreign Exchange Regulation Act, 1973, persons resident in
India were required to obtain holding licence for acquisition of foreign
securities. However, under the Foreign Exchange Management Act, 1999, there is
no obligation on residents to obtain holding licence.
2. It is,
therefore, clarified that no holding licence for acquisition of foreign
securities by a person resident in India, is required to be obtained from the
Reserve Bank. Under Foreign Exchange Management Act (FEMA), 1999, in terms of
Regulation 4 of Notification No. FEMA 19/RB-2000 dated May 3, 2000, a person
resident in India has general permission for purchase and sale of foreign
securities, in certain cases, including acquisition of bonus shares. General
permission has also been granted, vide Regulation 19(1) of the above
Notification, for purchase/acquisition of foreign securities by a person
resident in India, in certain cases such as by way of gifts/inheritance from a
person resident outside India as well as acquisition of foreign securities
under Cashless Employees Stock Option Scheme. However, in all other cases which
are not covered by general or special permission, prior permission of the
Reserve Bank should be obtained before acquisition of foreign security. It is
also clarified that prior permission of the Reserve Bank is required in terms
of Regulation 21 of the said Notification for acquisition of foreign securities
as qualification shares, rights shares, etc.
3. Authorised
Dealers may bring the contents of this circular to the notice of their
constituents concerned.
4. The
directions contained in this circular have been issued under section 10(4) and
section 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999).