NRI Fixed Deposit Rates on Investment on FDs in India

There is a tremendous boom in the Indian economy. In the face of the economic slump, the Indian economy stands resilient. Previously, the trend was to migrate to the west which was experiencing an economic boom. But now the trend has reversed. Indians living abroad are thinking of investing in India. For a country that was seen as a land of little opportunities, it is now seen as a country of a plenitude of opportunities.

Can NRIs invest in India?

Whatever investment options are available to resident Indians, NRIs can make those investments too. However, this does not apply for persons of Indian origin as they cannot make investments in agricultural businesses in India.

NRIs can invest in the stock market of India. They may subscribe to the shares and debentures of Indian companies. They can do this based on a a repatriable or non-repatriable basis. The other options available for them are the Portfolio Investment Scheme and government securities.

The UTI issues units and NRIs can invest in these units through remittances from their bank accounts held domestically or overseas.

The type of account used by NRIs to make investments

There are three types of accounts a NRI can use to make an investment in India. They are:

·         Foreign Currency Non Resident Account

·         Non-Resident Ordinary Rupee Account

·         Non-Resident External Rupee Account

Understanding the 24% and 40% schemes

The 24% scheme allows Indian companies to open up their shares and debentures to NRI investments. This does not apply for Indian companies involved in agricultural business.

The 40% applies to equity purchase, preference shares purchase, and convertible debenture purchase. Such purchases should not exceed more than 50% of each issue’s face value. There is a limit to repatriation – up to 40% of new issues are not allowed to be repatriated.

This scheme has enabled many companies to raise capital without going to IPO. Under this scheme, NRIs can invest in Greenfield projects, expansion and diversification projects of currently operating companies.

The 24% and 40% scheme has seen many companies coming to India based on the backing of NRI funds. This trend has seen the IT sector boom in India. The IT sector rides high on the investments of NRIs. Small and medium sized IT companies back themselves up with NRI funds.

There has been a lot of debate on whether the scheme should extend to agricultural businesses.