RBI/2007-2008/18
Master Circular No.02/2007-08

July 2, 2007

To,

All Category - I Authorised Dealer banks

Foreign investment in India is governed by sub-section (3) of section 6 of the Foreign Exchange Management Act, 1999 read with Notification No. FEMA 20/2000-RB dated May 3, 2000, as amended from time to time. The regulatory framework and instructions issued by the Reserve Bank of India have been compiled in this Master Circular. In addition to the above, this Master Circular also covers the following areas.

(i) Acquisition of immovable property which is regulated in terms of Section 6(3) (i) of Foreign Exchange Management Act, 1999 read with Notification No. FEMA 21/ 2000-RB dated May 3, 2000;

(ii) Establishment or Branch/Liaison Office in India, which is regulated in terms of Section 6(6) of Foreign Exchange Management Act, 1999 read with Notification No. FEMA 22/ 2000-RB dated May 3, 2000;

(iii) Investment in capital of partnership firms or proprietary concern which is regulated in terms of Section 2(h) of Section 47 of Foreign Exchange Management Act, 1999, read with Notification No. FEMA 24/2000-RB dated May 3, 2000.

2. This Master Circular consolidates the existing instructions issued by the Reserve Bank of India through AP (DIR Series) Circulars and Notifications under FEMA, in respect of the above areas. The list of underlying circulars/notifications is furnished in Appendix.

3. This Master Circular is being issued with a sunset clause of one year. This circular will stand withdrawn on July 1, 2008 and be replaced by an updated Master Circular on the subject on that date.

Yours faithfully,