NEW DELHI: The Union cabinet on Thursday revised the foreign direct investment (FDI) policy to allow non-resident Indians (NRIs) to invest in India like any other Indian citizen but with a rider that the investment so made cannot be repatriated.
It also expanded the definition of the NRI to include those having the Persons of Indian Origin (PIOs) and Overseas Citizens of India (OCIs) cards to enjoy the facilities at par with NRIs.
The decision excludes investments by NRIs, PIOs and OCIs from the category of the foreign investments. An official said this will result in increased investments and greater inflow of foreign exchange remittances leading to economic growth.
The Reserve Bank of India (RBI) had already allowed investments by NRIs under schedules 1, 3 and 4 of FEMA 20 since 2000 on the non-repatriation basis, but so far they were treated as foreign investments and not domestic investments on which there are no restrictions.
The cabinet decision makes it clear that since the investments under Schedule 4 of FEMA are on non-repatriable basis, they will henceforth be treated as domestic investments.
PTI adds: The government had earlier raised the FDI limit in sectors such as defence, insurance, real estate, railways and medical devices.
During his foreign vists, Prime Minister Narendra Modi has been reaching out to NRIs to invest in India.
Non-resident Indians too have been demanding that their investment be considered as domestic investment.
A committee, set up to look into the possibility of treating non-repatriable NRI funds as domestic investment, had earlier said that NRIs might prefer investing through corporate entities.
Facility of investment on non-repatriable basis was introduced primarily with the intention of providing NRIs an investment option for utilisation of their domestic resources, which were not freely repatriable.
It was intended to provide NRIs an incentive to bring funds into India without repatriation rights, at a time when foreign exchange reserves were limited and capital inflows were modest, the statement said.
The provision should continue to incentivise investments by NRIs, including OCIs and PIOs, resulting in increased investments in the country.
Since the investments made under Schedule 4 are on a non-repatriable basis, it needs to be clearly provided that such investments, for the purposes of FDI policy, are domestic investments, it added.
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