RBI allows foreign firms to issue Indian depository receipts
22 Jul 2009
The Reserve Bank of India today notified the operationalisation of the Indian Depository Receipts (IDR) Rules 2004, which will allow eligible overseas firms to issue Indian Depository Receipts through a domestic depository, with immediate effect.
It will also facilitate the purchase, possession, transfer and redemption of IDRs by persons resident in India and outside India, from time to time, with immediate effect.
"Accordingly, eligible companies resident outside India may issue Indian Depository Receipts (IDRs) through a Domestic Depository. The permission has been granted subject to compliance with the Companies (Issue of Depository Receipts) Rules, 2004 and subsequent amendments made thereto and the SEBI (DIP) Guidelines, 2000, as amended from time to time," the RBI said ion a release.
Financial/banking companies having presence in India, either through a branch or subsidiary, however, will have to obtain the approval of the sectoral regulator for raising funds through issuance of IDRs, the RBI release said.
Investment by residents: The FEMA Regulations will not be applicable to persons resident in India as defined under section 2(v) of the Foreign Exchange Management Act (FEMA), 1999, for investing in IDRs and subsequent transfer arising out of transaction on a recognised stock exchange in India. Foreign institutional investors (FIIs), including SEBI-approved sub-accounts of the FIIs, registered with SEBI and non-resident Indians (NRIs) may also invest, purchase, hold and transfer IDRs of eligible companies resident outside India and issued in the Indian capital market, subject to the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000.
Fungibility: Automatic fungibility of IDRs is not permitted.
