Citizens' Issues
NRI-controlled overseas corporate bodies are back
While the new dispensation will add to the ease of making investments in India, regulators will have to keep a close watch to avoid history repeating itself
 
The far-reaching changes in the regulatory regime for foreign direct investment (FDI), as per changes made by the recent press note (no. 12 dated 24 November 2015) (http://dipp.nic.in/English/acts_rules/Press_Notes/pn12_2015.pdf) issued by Department of Industrial Policy & Promotion (DIPP), has also silently brought about a significant change. In the press note, overseas corporate bodies (OCBs), which were de-recognised in 2003, have been re-recognised.
 
This re-recognition comes by virtue of para 3.1.3 of the FDI Policy, which says: A company, trust and partnership firm incorporated outside India and owned and controlled by non-resident Indians can invest in India with the special dispensation as available to Non-Resident Indians (NRIs) under the FDI policy.
 
After the stock scam of 1992, Securities and Exchange Board of India (SEBI) investigations discovered NRIs setting-up OCBs in Mauritius for the purpose of carrying out high-value transactions to gain tax benefits. Based on the investigations, OCBs were disallowed from making an investments in India under the portfolio investment scheme (PIS) vide Notification No. FEMA 46 dated 29 November 2001. 
 
NRIs were allowed to hold the shares and convertible debentures purchased under PIS till such time these are sold on stock exchanges in India and the authorised dealer (AD) shall continue to report, every sale transactions undertaken by the OCBs. They were also allowed to enjoy the facilities of opening and maintaining non-resident accounts and were considered to be eligible for making FDI, under Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000.
 
The Reserve Bank of India (RBI) carried on review of investment activities of OCBs in India on the recommendations of Joint Parliamentary Committee (JPC) on Security Market Scam. Considering the fact that the OCBs were owned by individuals (i.e. either by Indians or NRIs) and not being regulated by any of the regulatory authority, they were de-recognised in October 2003 by passing Foreign Exchange Management (Withdrawal of General Permission to Overseas Corporate Bodies (OCBs)) Regulations, 2003.  Hence, OCBs as a separate 'class of investor' entity were not be allowed to make fresh investments in India under various routes/ schemes available under the FEMA provisions including FDI.
 
New rule for overseas NRI bodies: Earlier, there was a requirement of 60% NRI control – now it is merely controlling the management and holding more than 50% of capital. Amended para 2.1.7 states: ‘Control’ shall include the right to appoint a majority of the directors or to control the management or policy decisions including by virtue of their shareholding or management rights or shareholders agreements or voting agreements. Amended para 2.1.28 states: A company is considered as 'Owned’ by resident Indian citizens if more than 50% of the capital in it is beneficially owned by resident Indian citizens and / or Indian companies, which are ultimately owned and controlled by resident Indian citizens;
 
The body need not be a corporate body – it may be either a company or trust or partnership firm.
 
Special dispensation for investment by NRIs: Special dispensations available to NRIs, which may not be available to other non-residents, are as follows:
 
  1. Press note no. 7 dated 3 June 2015 allowed investment by NRIs under Schedule 4 of FEMA (Transfer or Issue of Securities by Persons Resident Outside India) Regulations, 2000 (FDI Regulations) shall be deemed to be domestic investment at par with the investment made by residents;
  2. FDI cap shall not apply if NRIs make an investment through Schedule 4 of FDI Regulations;
  3. As per Para 3.1.5, NRIs under Schedules 3 of FDI Regulations, can invest/trade through a registered broker in the capital of Indian Companies on recognised Indian Stock Exchanges. However, the same is not the case for other non-residents except for registered FIIs and FPIs;
  4. Para 3.2.2 states that an NRI can invest in the capital of a firm or a proprietary concern in India on non-repatriation basis subject to fulfilment of conditions specified therein;
 
The press note amended the definition of NRI to mean an individual resident outside India who is a citizen of India or is Overseas Citizen of Indian Origin (OCIO) cardholder within the meaning of section 7(A) of the Citizenship Act 1955. Person of Indian Origin (PIO) cardholders registered as such under Notification No. 26011/4/48 FI, dated 19 August 2002, issued by the Central Government are deemed to be "Overseas Citizen of India" cardholders.
 
Impact of the amendment: Several NRIs may either already have OCBs in foreign jurisdictions or they may find it easy to form such bodies in lightly regulated jurisdictions, particularly those that have comprehensive Double Taxation Avoidance Treaties (DTAT) with India. NRIs may find it much better to invest through bodies registered outside India, than to form bodies in India.
 
While, the new dispensation will add to the ease of making investments in India, regulators will have to keep a close watch to avoid history repeating itself.
 
(Vinod Kothari is a chartered accountant, trainer and author. Nidhi Parmar works in Corporate Law Services Group at Vinod Kothari & Co) 
 

User

Can Rehabilitation Fund be a new healthcare paradigm for the disabled?
It is high time that the load on the healthcare NGOs is eased by creating a Rehabilitation Fund for disabled through CSR projects of companies. This will help the suffering patients once again become economic contributors and put a smile back on their faces
 
Disability inflicts huge costs. Healthcare expenses including diagnostics, medicines and therapy, aids and appliances are spiraling. There have been occasions of people selling their property, wiping off their savings and taking loans to keep going. There is a need to create alternative sources of funding for them. A rehabilitation fund created using insurance and corporate funding could turn out to be new paradigm in Indian healthcare sector to help the disabled.
 
Rehabilitation Insurance Fund can help any permanent health condition (like spinal cord injury), which does not require hospitalisation post-surgery and yet is a huge financial drain on the person to exist and survive lifelong. The cost of living expenses which requires regular (sometimes) daily physiotherapy, diagnostic tests, doctor visits for examination, aids and appliances like wheelchairs, shower chairs, specialised cots and cushions, medication and ointments, specialised expensive diet, catheters, jelly and supplies of personal hygiene etc. these are lifelong expenses. There are additional costs such as transportation and caregiver expenses. The disability may also lead to losing a job and thus the person is dependent on the family. The financial drain is tremendous and such factors support the hypothesis that launch of Rehabilitation Fund would mitigate this huge financial expense and give a source of hope to continue with a reasonably good quality of life for such citizens. 
 
There are already such examples. Nottwil in Switzerland came into existence because a single doctor made it his duty to set up a foundation for people with spinal cord Injury. The foundation is based on an insurance model. Everyone can pay CHF45 as insurance fee per year to be entitled to a CHF2,00,000 payment in case of a traumatic spinal cord injury. 
 
In order to enable and empower persons with disability to live as independently and as fully as possible, health services and their access to persons with disabilities assume a very significant role. In this context, the Rehabilitation Fund facility becomes important but presently such products are not available for persons with disabilities.
 
Proposed private sector rehabilitation fund model: 
 
  1. WHO (World Health Organisation) has declared spinal cord injury as the most devastating injury. Currently there are 1.5 million people with spinal cord injury in India. Each year we add 20,000 due to road traffic accidents, falls and diseases of the spine.
  2. Spinal cord injury affects sensation, movement, bladder, bowel, bones, skin, fertility, respiration, and sometimes physiological trauma too. Consistent and lifelong rehabilitation is the only safe and proven method for a good quality of life and it costs money. Lots of money! Spinal cord injury is the very expensive in terms of life expenses.
  3. Indians spend approximately Rs50,000 (paraplegic-spinal cord injury waist down) to Rs1 lakh (quadriplegic-spinal cord injury chest down) per month. Average Rs50,000 per month.
  4. It is mandatory for listed companies to contribute 2% of their profits on corporate social responsibility (CSR).1.5 million people with spinal cord injury X Rs50,000= Rs750 crore is the approximate amount of fund needed pan-India.

 

  1. A friend with spinal cord injury registers with this CSR and Rehab Fund portal uploads their bills with the disability certificate, medical reports and photographs.
  2. The friend with spinal injury gets the re-imbursement. A neutral NGO or expert body verifies the expenses and the rehab amount is either paid monthly/ quarterly or yearly.
 
The rehabilitation expenses include: 
 
  1. Physiotherapy 
  2. Counselling both psychological and peer.
  3. Pathology 
  4. Urology, including urodynamics
  5. Occupation therapy 
  6. X-rays 
  7. Periodic visits to doctors and specialists-exercise 
  8. Home rehabilitation (cost of equipments)
  9. Complications for bones (injections)
  10. Pressures sores and bed sores, which sometimes require surgery, hospitalisation and treatment.
  11. Alternative medicine treatment like homeopathy
  12. Assistive technology like wheel chairs, calipers, crutches, etc.
  13. Home modifications, retrofitting for ramps, kitchen, washroom, railings and many more.
  14. Sports rehabilitation
  15. Medicines and medical supplies.
  16. Transportation for the health visits.
  17. Vocational training to learn a new skill, modified work station, equipments, specialised software etc.
 
It is high time that the load on the NGO sector is eased by creating a 
Rehabilitation Fund through CSR projects of companies thus enabling a huge potential to once again become an economic contributor for our nation and put a smile back on the suffering patients. 
 
We can then in unison chant: “Rehabilitate. Relive. Rejoice”
 
(Dr Ketna L Mehta is an educationist, editor, author and Founder Trustee of Nina Foundation that works for the rehabilitation of economically and socially disadvantaged people with spinal injuries. Her PhD Thesis was “Market Potential Study for a World Class Spinal Cord Injury Rehabilitation Centre in Mumbai”. She is also Editor and Associate Dean Research, WeSchool. Email- [email protected],  www.ninafoundation.org)

User

COMMENTS

A P T Selvakumar

1 year ago

Can this idea be taken to Bill and Melinda Gates Foundation as well? Any funding towards this cause with support from Govt regulations would greatly help the cause.

A P T Selvakumar

1 year ago

Very good idea. This insurance program would ensure the benefits accrue to the society

Mayawati seeks quotas in promotions
BSP chief Mayawati on Monday demanded reservation for Dalits and tribals during promotions in the government and the private sector.
 
Speaking in the Rajya Sabha, she also sought reservation for economically backward upper caste people.
 
"Prime Minister Narendra Modi said a lot in his concluding remarks during the constitution debate on Friday," she said. 
 
"It would have been better if he had announced strong schemes for the weaker sections of the society like reservation for ST/SCs in promotion, reservation in private sector and reservation for economically backward class of the upper caste," the Bahujan Samaj Party chief said. 
 
The former Uttar Pradesh chief minister was participating in a discussion to mark the 125th birth anniversary of B.R. Ambedkar, the main architect of the Indian constitution.
 
She took a dig at Modi. "The prime Minister speaks of the greatness of Buddhism when he travels abroad but in India he and his colleagues' actions are against those teachings.
 
"Lord Buddha gave the message of humanity and peace, a message that is much needed right now. I advise this government to follow Ambedkar's path," she added.
 
Initiating the debate on the second day, Parliamentary Affairs Minister M. Venkaiah Naidu asked opposition members to respect the mandate of the 2014 Lok Sabha election.
 
"Let us tolerate the mandate of the people, we must respect that, whether you like it or not is not the issue," he said.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

User

We are listening!

Solve the equation and enter in the Captcha field.
  Loading...
Close

To continue


Please
Sign Up or Sign In
with

Email
Close

To continue


Please
Sign Up or Sign In
with

Email

BUY NOW

The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Magazine
Fiercely independent and pro-consumer information on personal finance
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
MAS: Complete Online Financial Advisory
(Includes Moneylife Magazine and Lion Stockletter)