1[ANNEXURE B

(See paragraph 2)

Sectoral cap on investment by persons resident outside India

Sector	Investment Cap	Description of Activity/Items/Conditions
1	2	3
1. Private Sector Banking	49%	Subject to guidelines issued by RBI from time to time
2. Non-Banking Financial Companies	100%	FDI/NRI 2 [***] investments allowed in the following 19 NBFC activities shall be as per the levels indicated below :
		(a) Activities covered :
		1. Merchant Banking
		2. Under Writing
		3. Portfolio Management Services
		4. Investment Advisory Services
		5. Financial Consultancy
		6. Stock-broking
		7. Asset Management
		8. Venture Capital
		9. Custodial Services
		10. Factoring
		11. Credit Reference Agencies
		12. Credit Rating Agencies
		13. Leasing & Finance
		14. Housing Finance
		15. Forex-broking
		16. Credit Card Business
		17. Money-changing Business
		18. Micro-credit
		19. Rural credit
		(b) Minimum Capitalisation norms for fund based (NBFCs)
		(i) For FDI upto 51%, US $ 0.5 million to be brought in upfront
		(ii) If the FDI is above 51% and upto 75% US $ 5 million to be brought upfront
		(iii) If the FDI is above 75% and upto 100%, US $ 50 million out of which $ 7.5 million to be brought in upfront and the balance in 24 months
		(c) Minimum Capitalisation norms for non-fund based activities
		Minimum Capitalisation norm of US $ 0.5 million is applicable in respect of non-fund based NBFCs with foreign investment.
		(d) Foreign investors can set up 100% operating subsidiaries without the condition to disinvest a minimum of 25% of its equity to Indian entities, subject to bringing in US $ 50 million as at (b) (iii) above (without any restriction on number of operating subsidiaries without bringing in additional capital).
		(e) Joint Venture Operating NBFCs that have 75% or less than 75% foreign investment will also be allowed to set up subsidiaries for undertaking other NBFC activities, subject to the subsidiaries also complying with the applicable minimum capital inflow i.e., (b)(i) and (b)(ii) above.
		(f) FDI in the NBFC sector is put on automatic route subject to compliance with guidelines of the Reserve Bank of India. RBI would issue appropriate guidelines in this regard.
3. Insurance	26%	FDI upto 26% in the Insurance sector is allowed on the automatic route subject to obtaining licence from Insurance Regulatory and Development Authority (IRDA)
4. Telecommunications	49%	(i) In basic, Cellular, Value Added Services, and Global Mobile Personal Communications by Satellite, FDI is limited to 49% subject to licencing and security requirements and adherence by the companies (who are investing and the companies in which the investment is being made) to the license conditions for foreign equity cap and lock-in-period for transfer and addition of equity and other license provisions.
		(ii) ISPs with gateways, radio paging and end-to-end bandwidth, FDI is permitted upto 74% with FDI, beyond 49% requiring Government approval. These services would be subject to licensing and security requirements.
		(iii) No equity cap is applicable to manufacturing activities
		(iv) FDI upto 100% is allowed for the following activities in the telecom sector :
		(a) ISPs not providing gateways (both for satellite and submarine cables)
		(b) Infrastructure providers providing dark fibre (IP Category I)
		(c) Electronic Mail, and
		(d) Voice Mail
		The above would be subject to the following conditions :
		(a) FDI upto 100% is allowed subject to the condition that such companies would divest 26% of their equity in favour of Indian public in 5 years, if these companies are listed in other parts of the world.
		(b) The above services would be subject to licensing and security requirements, wherever required.
		(c) Proposal for FDI beyond 49% shall be considered by FIPB on case to case basis.
5. Petroleum Refining (Private Sector)	100%	FDI permitted upto 100% in case of private Indian companies
6. Housing and Real Estate	100%	Only NRIs 1 [***] are allowed to invest upto 100% in the areas listed below :
		(a) Development of serviced plots and construction of built-up residential premises
		(b) Investment in real estate covering construction of residential and commercial premises including business centres and offices
		(c) Development of townships
		(d) City and regional level urban infrastructure facilities, including both roads and bridges;
		(e) Investment in manufacture of building materials;
		(f) Investment in participatory ventures in (a) to (c) above
		(g) Investment in Housing Finance Institutions which is also opened to FDI as an NBFC;
7. Coal & Lignite		(i) Private Indian companies setting up or operating power projects as well as coal and lignite mines for captive consumption are allowed FDI upto 100%.
		(ii) 100% FDI is allowed for setting up coal processing plants subject to the condition that the company shall not do coal mining and shall not sell washed coal or sized coal from its coal processing plants in the open market and shall supply the washed or sized coal to those parties who are supplying raw coal to coal processing plants for washing or sizing.
		(iii) FDI upto 74% is allowed for exploration or mining of coal or lignite for captive consumption.
		(iv) In all the above cases, FDI is allowed upto 50% under the automatic route subject to the condition that such investment shall not exceed 49% of the equity of a PSU.
8. Venture Capital Fund (VCF) and Venture Capital Company (VCC)		Offshore Venture Capital Funds/companies are allowed to invest in domestic venture capital undertaking as well as other companies through the automatic route, subject only to SEBI regulation and sector specific caps on FDI.
9. Trading		Trading is permitted under automatic route with FDI upto 51% provided it is primarily export activities and the undertaking is an export house/trading house/super trading house/star trading house. However, under the FIPB route :
		(i) 100% FDI is permitted in case of trading companies for the following activities :
		(a) exports;
		(b) bulk imports with export/expanded warehouse sales;
		(c) cash and carry wholesale trading;
		(d) other import of goods or services provided at least 75% is for procurement and sale of the same group and not for third party use or onward transfer/distribution/sales
		(ii) The following kinds of trading are also permitted, subject to provisions of Exim Policy
		(a) Companies for providing after sales services (that is not trading per se);
		(b) Domestic trading of products of JVs is permitted at the wholesale level for such trading companies who wish to market manufactured products on behalf of their Joint ventures in which they have equity participation in India;
		(c) Trading of hi-tech items/items requiring specialized after sales service;
		(d) Trading of items for social sector;
		(e) Trading of hi-tech, medical and diagnostic items;
		(f) Trading of items sourced from the small scale sector under which, based on technology provided and laid down quality specifications, a company can market that item under its brand name;
		(g) Domestic sourcing of products for exports;
		(h) Test marketing of such items for which a company has approval for manufacture provided such test marketing facility will be for a period of two years, and investment in setting up manufacturing facilities commence simultaneously with test marketing;
		(i) FDI upto 100% permitted for e-commerce activities subject to the condition that such companies would divest 26% of their equity in favour of the Indian public in five years, if these companies are listed in other parts of the world. Such companies would engage only in business to business (B2B) e-commerce and not in retail trading.
10. Power	100%	FDI allowed upto 100% in respect of projects relating to electricity generation, transmission and distribution, other than atomic reactor power plants. There is no limit on the project cost and quantum of foreign direct investment.
11. Drugs & Pharmaceuticals	100%	FDI permitted upto 100% for manufacture of drugs and pharmaceuticals provided the activity does not attract compulsory licensing or involve use of recombinant DNA technology and specific cell/tissue targeted formulations. FDI proposal for the manufacture of licensable drugs and pharmaceuticals and bulk drugs produced by recombinant DNA technology and specific cell/tissue targeted formulations will require prior Govt. approval.
12. Road and highways, Ports and harbours	100%	In projects for construction and maintenance of roads, highways, vehicular bridges, toll roads, vehicular tunnels, ports and harbours.
13. Hotel & Tourism	100%	The term ‘hotels’ includes restaurants, beach resorts and other tourist complexes providing accommodation and/or catering and food facilities to tourists. Tourism related industry include travel agencies, tour operating agencies and tourist transport operating agencies, units providing facilities for cultural, adventure and wild life experience to tourists, surface, air and water transport facilities to tourists, leisure, entertainment, amusement, sports and health units for tourists and Convention/Seminar units and Organisations.
		For foreign technology agreements, automatic approval is granted if—
		(i) Upto 3% of the capital cost of the project is proposed to be paid for technical and consultancy services including fees for architects design, supervision, etc.
		(ii) Upto 3% of the net turnover is payable for franchising and marketing/publicity support fee, and
		(iii) Upto 10% of gross operating profit is payable for management fee, including incentive fee.
14. Mining	74%	(i) For exploration and mining of diamonds and precious stones FDI is allowed upto 74% under automatic route,
	100%	(ii) For exploration and mining of gold and silver and minerals other than diamonds and precious stones, metallurgy and processing FDI is allowed upto 100% under automatic route,
		(iii) Press Note 18 (1998 series) dated 14-12-1998 would not be applicable for setting up 100% owned subsidiaries in so far as the mining sector is concerned, subject to a declaration from the applicant that he has no existing joint venture for the same area and/or the particular mineral.
15. Advertising	100%	Advertising Sector
		FDI upto 100% allowed on the automatic route
16. Films	100%	Film Sector
		(Film production, exhibition and distribution including related services/products)
		FDI upto 100% allowed on the automatic route with no entry-level condition.
17. Airports	74%	Govt. approval required beyond 74%
18. Mass Rapid Transport Systems	100%	FDI upto 100% is permitted on the automatic route in mass rapid transport system in all metros including associated real estate development.
19. Pollution Control & Management	100%	In both manufacture of pollution control equipment and consultancy for integration of pollution control systems is permitted on the automatic route.
20. Special Economic Zones	100%	All manufacturing activities except :
		(i) Arms and ammunition, explosives and allied items of defence equipments, defence aircrafts and warships,
		(ii) Atomic substances, Narcotics and Psychotropic Substances and Hazardous Chemicals,
		(iii) Distillation and brewing of Alcoholic drinks, and
		(iv) Cigarette/cigars and manufactured tobacco substitutes.]
1 [21. Any other sector/Activity	100%]
(if not included in Annexure A)