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Category Archives: Global Financial Markets

January 24, 2022


  1. What is a global investment?

Global or international investing means investing in different global investment instruments so that one’s financial portfolio becomes geographically diversified. This international investment not only diversifies the portfolio but also helps to spread the investment risk among various foreign markets and companies thereby ensuring the security and long term safety of the investment.

  1. What is Indian government’s policy on investing globally?

As per the Reserve Bank of India (RBI), Indian government has opened up doors for investing and remitting abroad as it believes that joint ventures abroad promote economic co-operation between India and the host countries. Since globalization of trade is a two-way process, integration of the Indian economy with the rest of the world with all its attendant benefits is achieved through overseas investment. It is the reverse of Foreign Direct Investment (FDI) and can be termed as Indian Direct Investment abroad.

Thanks to a liberalized economic policy from 1992 onwards and huge foreign investments by Foreign Institutional Investors (FIIs) and Non Resident Indians (NRIs), India’s foreign exchange reserve now stands at several billion dollars.

This huge fund has permitted the Reserve Bank of India to implement a much liberalized foreign exchange policy. In 2004, RBI allowed an Indian citizen to invest $25,000 US abroad. Over the years, this amount has been increasing steadily and as of today, $250,000 US per year per individual can be remitted/invested outside of India. This scheme is popularly known as Liberalized Remittance Scheme or LRS.

Indian HNIs can certainly benefit from this policy changes. Unfortunately, due to lack of knowledge and awareness regarding investing globally, a negligible number of Indian investors have taken advantage of the LRS.

  1. What are the types of assets that Indian HNIs can invest in outside of India?

In general, Indian citizens can invest in equity shares, debt instruments, foreign portfolio, real estate, life insurance premium (except term insurance) including the opening of foreign accounts abroad for investment. The payment can also be remitted to close relative(s) as a gift or for purpose of family maintenance. Detailed information is available on the official RBI website.

  1. Since the start of LRS, how much fund has been remitted/invested by Indian HNIs abroad?

According to the RBI, the Indian remittance has increased from $72 million US in 2007-08 to $19 billion US in 2019-20. In just over a decade, we are witnessing a huge change in the spending power and spending pattern of Indian HNIs.

  1. If Indian investors have remitted/invested $19 billion US in the last year, do you think Indian HNIs are savvy enough when it comes to foreign investments?

Economic liberalization, economic boom and the aforementioned LRS has resulted in the remittance of more than $19 billion US outside of India last year alone.

However, when we examine this data more closely, we find that a major portion of this remittance by Indian HNIs is expenditure and a very small portion of the money has been actually invested. Here is the RBI data for Indian outbound remittance in 2019-20 (in million US$)

  • (i) Deposits – 623.37
  • (ii) Purchase of immovable property – 86.43
  • (iii) Debt/equity – 431.41
  • (iv) Gift – 1904.53
  • (v) Donations – 22.32
  • (vi) Travel – 6954.20
  • (vii) Maintenance of close relatives – 3437.46
  • Medical expenses –33.88
  • (ix) Studies abroad – 4989.04
  • (x) Others –268.74

We can easily infer from the above data that the spending habits of Indian HNIs have seen a significant shift from domestic to international.

However, though Indian HNIs spend a substantial amount of their wealth abroad, their investing and saving habits have not changed and are still largely concentrated in the domestic domain. If this trend does not change, it can eventually result in financial distress for Indian HNIs who continue to spend abroad but do not invest abroad.

  1. Why do you say there could be financial distress for Indian HNIs?

Let’s take a simple example. 5 crore INR was equivalent to 1 million US$ in 2008. However, at the present time, this 5 crore INR is equivalent to 635,000 US$. This is due to the fact that the US dollar has been growing stronger year after year. Its exchange value increased from Rs. 49 in 2008 to Rs. 76 in 2020.

So when Indian HNIs continue to invest in India but spend a substantial amount of their money abroad, they are not getting the full value for their domestic investment, eventually decreasing their net worth and spending power. If the same amount is invested abroad, then the spending is balanced out because the currency is not devalued as you are spending in the same currency.

Let’s take another example of an Indian HNI who invests in stocks and shares in India. He may be earning really well in India but Dollex 30 Chart of the Indian stock market shows that in the last 12 years, investing in shares has not given any substantial return to the Indian investors in terms of the US dollar. So if this HNI wants to go abroad for a vacation, send his children abroad for higher studies or spend on foreign luxury items, the investments he has made in India must give higher returns to balance out the currency risk/fluctuation.

  1. What is the top foreign spend for Indian HNIs?

Careful analysis of the remittance data gives us an insight as to how Indian HNIs are spending their wealth abroad. As can be clearly seen, spending for children’s foreign education is on top of the list for Indian HNIs.

  1. In what type of asset classes can one invest outside of India?

There are primarily four options available. They are:

  1. The first option is investing in foreign stock markets and diversifying your portfolio globally. Due to recent advancements in technology, there are several platforms available whereby Indian investors can invest in stocks, debts and other instruments of more than 50 different stock markets of the world from a single account on any device. However, the lack of knowledge of foreign stock markets makes it difficult for Indian brokers and investors to venture into it.
  2. The second option is an investment in global real estate. Even though Indian investors prefer investing in real estate as compared to other asset classes, this investment in international real estate is limited to countries in the Middle East and Far East such as Thailand. However, there are excellent opportunities available for real estate investment in countries such as USA, Canada, UK, Australia, New Zealand and many European countries.

In many of these countries, the real estate market is booming so much that the government has restricted foreign investors from making investments in real estate or implemented additional welcome tax for foreign investors. In some countries, it is the buyer who has to pay all the transaction expenses and brokerage.

3. The third option is expansion of business. Not only big corporations and multi-nationals, now even Indian SMEs and exporters can invest out of India and expand their business by establishing their presence in international markets.

4. The fourth option is to invest in a second passport by way of Residency & Citizenship by Investment (RCI) programs. These RCI programs are being offered by more than 30 countries in the world. Investing in a second passport should not be perceived as abandoning your country but be seen as an opportunity to achieve many financial as well as non-financial benefits such as NRI status, visa-free travel, quality of life, expansion of business, portfolio diversification and retirement abroad.

The most important benefit that Indian parents can reap by investing in a second passport is the reduction in their child’s foreign university education fees by almost 80%.

  1. How can investing outside of India be beneficial to Indians, Indian companies and the Indian economy?

The liberalization of the Indian economy began in 1993-94. At that time the object was on attracting foreign investments to India and that policy continues till date. Over the years the strength of the Indian economy grew and the Indian government started focusing on creating bilateral trade between India and the rest of the world. The government wanted to create a bigger customer base for Indian companies and to that end, the Government of India has implemented certain regulations and policies from 2007 onwards to encourage greater outbound investments by Indian companies and individual Indian citizens.

These policies were created by the Indian government with a long term vision to not only encourage Indian multinational companies to make investments outside of India but also strengthen the Indian economy by assisting individuals and Indian SMEs to venture outside their comfort zone and promote India’s interests overseas.

One may ask how Indian HNIs and businesspersons can benefit from all this? The answer is simple. The world is increasingly becoming a global village and investing outside of India is a powerful tool that can be used by Indian HNIs and businesspersons not only for their personal advantage but also to contribute positively to the Indian economy by promoting bilateral trade. More NRI businesspersons mean more bilateral trade and increased remittance of foreign currency and business back into India.

Foreign investment can also be a highly effective and dependable strategy for Indian HNIs to assert their presence in the global business market. India is perhaps one of the last developing economies in the world where venturing outside of the country to conduct business has yet to become a way of doing business. Yes, there are businesspersons who have taken that risk but their percentage is very low as compared to our population and potential.

In 2020, investing abroad can be equated to creating a second option for your family and expanding your business interests. If we look at countries such as China, Taiwan, Vietnam and Korea, the businesspersons and HNIs of these countries have made personal as well as business investments in other countries, thus providing their families and future generations with a second option along with economic growth. It’s high time that Indian businesspersons and HNIs also start thinking in a similar manner.

  1. The Indian real estate and the stock market are booming right now and very soon India is likely to be a favorite destination for foreign companies. In such a scenario, why should Indian HNIs consider investing outside of India?

‘Do not put all eggs in one basket’.This old saying has been proven true time and again especially with reference to national and international economic markets. In most cases, investors have failed to understand this old saying and have lost money heavily by investing it in just one type of market.

Every investor must consider four types of risk to their investments. These are – political risk, interest rate risk, currency exchange rate risk and most importantly, in the case of Indian HNIs, new spending habits.

There is no exact mix one can work out for investing abroad but traditionally, one can take ratio of 70% local market and 30 % foreign market.

 Do not be tempted to put too many eggs in one basket, no matter how attractive and convincing it may seem. As the Indian government now allows investments abroad, it is time that Indian businesspersons look closely at new avenues of investing outside of India and diversifying their portfolios.

A few years back, investing in mutual funds was frowned upon but now we say, ‘Mutual Funds SahiHai!’

Similarly, in the next few years, Indian investors will say,

‘Foreign Investment Zaroori Hai!’

Legal disclaimer:

  • (i) This blog/article does not give any legal advice and does not establish a client-lawyer relationship. Information provided is for the purpose of general information only.
  • (ii) Only Indian lawyers can practice and advise on legal matters in India, including immigration and visa law. Foreign immigration lawyers cannot open offices and advice Indian citizens on immigration and visa matters.
  • (iii) Always refer to official government websites or consult an immigration lawyer for the latest information as immigration and visa laws change quite frequently.
  • (iv) Ajmera Law Group assists their client base by associating with law firms in respective jurisdictions.
  • (v) Ajmera Law Group does not give franchise or agency of their legal services.
  • (vi) We do not assist in job placement and/or finding a job in a foreign country. Please consult only licensed recruitment agencies.
  • (vii) Any citizen or company, who is not an Indian lawyer, giving legal advice related to immigration and visa matters is in violation of the Indian Advocates Act 1961.


August 26, 2021

The legal framework for the administration of foreign exchange transactions in India is provided by the Foreign Exchange Management Act, 1999. Under the Foreign Exchange Management Act, 1999 (FEMA), which came into force with effect from June 1, 2000, all transactions involving foreign exchange have been classified either as capital or current account transactions. All transactions undertaken by a resident that do not alter his / her assets or liabilities, including contingent liabilities, outside India are current account transactions.


In terms of Section 5 of the FEMA, persons resident in India 1 are free to buy or sell foreign exchange for any current account transaction except for those transactions for which witdrawal of foreign exchange has been prohibited by the Central Government, such as remittance out of lottery winnings; remittance of income from racing/riding, etc., or any other hobby; remittance for purchase of lottery tickets, banned/proscribed magazines, football pools, sweepstakes, etc.; remittance of dividend by any company to which the requirement of dividend balancing is applicable; payment of commission on exports under Rupee State Credit Route except commission up to 10% of the invoice value of exports of tea and tobacco; payment of commission on exports made towards equity investment in Joint Ventures / Wholly Owned Subsidiaries abroad of Indian companies; remittance of interest income on funds held in Non-Resident Special Rupee (Account) Scheme and payment related to “call back services” of telephones.


Foreign Exchange Management (Current Account Transactions) Rules, 2000 – Notification [GSR No. 381(E)] dated May 3, 2000 and the revised Schedule III to the Rules as given in the Notification G.S.R. 426(E) dated May 26, 2015 is available in the Official Gazette as well as, as an Annex to our Master Direction on ‘Other Remittance Facilities’ available on our website www.rbi.org.in.


These FAQs attempt to put in place the common queries that users have on the subject in easy to understand language. However, for conducting a transaction, the Foreign Exchange Management Act, 1999 (FEMA) and the Regulations/Rules made or directions issued thereunder may be referred to.


Q 1. What is the Liberalised Remittance Scheme (LRS) of USD 2,50,000 ?

Ans. Under the Liberalised Remittance Scheme, all resident individuals, including minors, are allowed to freely remit up to USD 2,50,000 per financial year (April – March) for any permissible current or capital account transaction or a combination of both. Further, resident individuals can avail of foreign exchange facility for the purposes mentioned in Para 1 of Schedule III of FEM (CAT) Amendment Rules 2015, dated May 26, 2015, within the limit of USD 2,50,000 only.

The Scheme was introduced on February 4, 2004, with a limit of USD 25,000. The LRS limit has been revised in stages consistent with prevailing macro and micro economic conditions.

In case of remitter being a minor, the LRS declaration form must be countersigned by the minor’s natural guardian. The Scheme is not available to corporates, partnership firms, HUF, Trusts etc.


Q 2. What are the prohibited items under the Scheme?

Ans. The remittance facility under the Scheme is not available for the following:

Remittance for any purpose specifically prohibited under Schedule-I (like the purchase of lottery tickets/sweepstakes, proscribed magazines, etc.) or any item restricted under Schedule II of Foreign Exchange Management (Current Account Transactions) Rules, 2000.
Remittance from India for margins or margin calls to overseas exchanges / overseas counterparty.
Remittances for purchase of FCCBs issued by Indian companies in the overseas secondary market.
Remittance for trading in foreign exchange abroad.
Capital account remittances, directly or indirectly, to countries identified by the Financial Action Task Force (FATF) as “non-cooperative countries and territories”, from time to time.
Remittances directly or indirectly to those individuals and entities identified as posing a significant risk of committing acts of terrorism as advised separately by the Reserve Bank to the banks.


Q 3. What are the purposes under FEM (CAT) Amendment Rules, 2015, under which a resident individual can avail of a foreign exchange facility?

Ans. Individuals can avail of foreign exchange facility for the following purposes within the LRS limit of USD 2,50,000 on a financial year basis:

Private visits to any country (except Nepal and Bhutan)
Gift or donation
Going abroad for employment
Maintenance of close relatives abroad
Travel for business, or attending a conference or specialised training or for meeting expenses for meeting medical expenses, or check-up abroad, or for accompanying as attendant to a patient going abroad for medical treatment/ check-up
Expenses in connection with medical treatment abroad
Studies abroad
Any other current account transaction which is not covered under the definition of current account in FEMA 1999.
The AD bank may undertake the remittance transaction without RBI’s permission for all residual current account transactions which are not prohibited/ restricted transactions under Schedule I, II or III of FEM (CAT) Rules, 2000, as amended or are defined in FEMA 1999. It is for the AD to satisfy themselves about the genuineness of the transaction, as hitherto.


Q 4. Under LRS are resident individuals required to repatriate the accrued interest/dividend on deposits/investments abroad, over and above the principal amount?

Ans. No, the investor can retain and reinvest the income earned from portfolio investments made under the Scheme.

However, a resident individual who has made overseas direct investment in the equity shares and compulsorily convertible preference shares of a Joint Venture or Wholly Owned Subsidiary outside India, within the LRS limit, then he/she shall have to comply with the terms and conditions as prescribed under [Foreign Exchange Management (Transfer or Issue of any Foreign Security) Regulations 2004 as amended from time to time] Notification No. 263/ RB-2013 dated August 5, 2013.


Q 5. Can remittances under the LRS facility be consolidated in respect of family members?

Ans. Remittances under the facility can be consolidated in respect of close family members subject to the individual family members complying with the terms and conditions of the Scheme. However, clubbing is not permitted by other family members for capital account transactions such as opening a bank account/investment/purchase of property, if they are not the co-owners/co-partners of the investment/property/overseas bank account. Further, a resident cannot gift to another resident, in foreign currency, for the credit of the latter’s foreign currency account held abroad under LRS.


Q 6. Is the AD required to check the permissibility of remittances based on nature of the transaction or allow the same based on remitters declaration?

Ans. AD will be guided by the nature of the transaction as declared by the remitter in Form A2 and will thereafter certify that the remittance is in conformity with the instructions issued by the Reserve Bank in this regard from time to time. However, the ultimate responsibility is of the remitter to ensure compliance to the extant FEMA rules/regulations.


Q 7. Is it mandatory for resident individuals to have Permanent Account Number (PAN) for sending outward remittances under the Scheme?

Ans. Yes It is mandatory for the resident individual to provide his/her Permanent Account Number (PAN) for all transactions under LRS made through Authorized Persons.


Q 8. Are there any restrictions on the frequency of the remittance?

Ans. There are no restrictions on the frequency of remittances under LRS. However, the total amount of foreign exchange purchased from or remitted through, all sources in India during a financial year should be within the cumulative limit of USD 2,50,000.

Once a remittance is made for an amount up to USD 2,50,000 during the financial year, a resident individual would not be eligible to make any further remittances under this scheme, even if the proceeds of the investments have been brought back into the country.


Q 9. Resident individuals (but not permanently resident in India) can remit up to net salary after deduction of taxes. However, if he has exhausted the limit of USD 2,50,000 as net salary remittance and desires to remit any other income under LRS is it permissible as the limit will be over and above USD 2,50,000?

Ans. Resident individuals (but not permanently resident in India) who have remitted their entire earnings and salary and wish to further remit ‘other income’ may approach RBI with documents through their AD bank for consideration.


Q 10. Para 5.4 of AP DIR Circular 106 dated June 01, 2015, states that the applicants should have maintained the bank account with the bank for a minimum period of one year prior to the remittance for capital account transactions. Whether this restriction applies to current account transactions?

Ans. No. The rationale is that the remittance facility is up to the LRS limit of USD 250, 000 for current account transactions under Schedule III of FEM (CAT) Amendment Rules, 2015, such as for private and business visits which can also be provided by FFMCs. As FFMCs cannot maintain accounts of remitters the proviso (as mentioned in para 5.4 of the circular ibid) has been confined to capital account transactions. However, FFMCs, are required to ensure that the “Know Your Customer” guidelines and the Anti-Money Laundering Rules in force have been complied with while allowing the current account transactions.


Q 11. Are there any restrictions towards remittances to Mauritius and Pakistan for permissible current account transactions?

Ans. No, there are no restrictions towards remittances for current account transactions to Mauritius and Pakistan.

Remittances directly or indirectly to countries identified by the Financial Action Task Force (FATF) as “non-cooperative countries and territories”, from time to time; and remittances directly or indirectly to those individuals and entities identified as posing a significant risk of committing acts of terrorism as advised separately by the Reserve Bank to the banks are not permissible.


Q 12. What are the requirements to be complied with by the remitter?

Ans. The individual will have to designate a branch of an AD through which all the capital account remittances under the Scheme will be made. The applicants should have maintained the bank account with the bank for a minimum period of one year prior to the remittance.

For remittances pertaining to permissible current account transactions, if the applicant seeking to make the remittance is a new customer of the bank, Authorised Dealers should carry out due diligence on the opening, operation and maintenance of the account. Further, the AD should obtain bank statement for the previous year from the applicant to satisfy themselves regarding the source of funds. If such a bank statement is not available, copies of the latest Income Tax Assessment Order or Return filed by the applicant may be obtained. He has to furnish Form A-2 regarding the purpose of the remittance and declare that the funds belong to him and will not be used for purposes prohibited or regulated under the Scheme.


Q 13. Can remittances be made only in US Dollars?

Ans. The remittances can be made in any freely convertible foreign currency.


Q 14. Are intermediaries expected to seek specific approval for making overseas investments available to clients?

Ans. Banks including those not having an operational presence in India are required to obtain prior approval from Reserve Bank for soliciting deposits for their foreign/overseas branches or for acting as agents for overseas mutual funds or any other foreign financial services company.


Q 15. Are there any restrictions on the kind/quality of the debt or equity instruments an individual can invest in?

Ans. No ratings or guidelines have been prescribed under LRS of USD 2,50,000 on the quality of the investment an individual can make. However, the individual investor is expected to exercise due diligence while taking a decision regarding the investments which he or she proposes to make.


Q 16. Whether credit facilities (fund or non-fund based) in Indian Rupees or foreign currency can be extended by AD banks to resident individuals?

Ans. LRS does not envisage the extension of fund and non-fund-based facilities by the AD banks to their resident individual customers to facilitate remittances for capital account transactions under LRS.

However, AD banks may extend fund and non-fund-based facilities to resident individuals to facilitate current account remittances under the Scheme.


Q 17. Can bankers open foreign currency accounts in India for residents under LRS?

Ans. No.

Q 18. Can an Offshore Banking Unit (OBU) in India be treated on par with a branch of the bank outside India for the purpose of opening of foreign currency accounts by residents under the Scheme?

Ans. No.


Q 19. What are the documents required for withdrawal/remittance of foreign exchange for purposes mentioned in para 1 of Schedule III to FEM (CAT) Amendment Rules, 2015?

Ans. Permanent Account Number (PAN) is mandatory for all transactions under LRS.


Q 20. Whether documents viz 15 CA, 15 CB have to be taken in all outward remittance cases including remittances for maintenance etc.?

Ans. In terms of A. P. (DIR Series) circular No. 151 dated June 30, 2014, Reserve Bank of India will not issue any instructions under the FEMA, regarding the procedure to be followed in respect of deduction of tax at source while allowing remittances to the non-residents. It shall be mandatory on the part of ADs to comply with the requirement of the tax laws, as applicable.


Q 21. Will the expenses incurred by an LLP to sponsor the education expense of its partners who are pursuing higher studies for the benefit of the LLP will be outside the LRS limit of such individuals (partners)?

Ans. LLP is a body corporate and has a legal entity separate from its partners. Therefore, if the LLP incurs/sponsors the education expense of its partners who are pursuing higher studies for the benefit of the LLP, then the same shall be outside the LRS limit of the individual partners and would instead be deemed as residual current account transaction undertaken by the LLP without any limits.


Q 22. Clarification on remittance by sole proprietor under LRS.

Ans. In a sole proprietorship business, there is no legal distinction between the individual/owner and as such the owner of the business can remit USD up to the permissible limit under LRS. If a sole proprietorship firm intends to remit the money under LRS by debiting its current account then the eligibility of the proprietor in his individual capacity has to be reckoned. Hence, if an individual in his own capacity remits USD 250,000 in a financial year under LRS, he cannot remit another USD 250,000 in the capacity of owner of the sole proprietorship business as there is no legal distinction.


Q 23. Whether prior approval is required to open, maintain and hold a foreign currency account with a bank outside India for making remittances under the LRS?

Ans: No.


Q 24. What are the facilities under Schedule III of FEM (CAT) Amendment Rules, 2015 available for persons other than individuals?

Ans. The following facilities are available to persons other than individuals:

Donations up to one percent of their foreign exchange earnings during the previous three financial years or USD 5,000,000, whichever is less, for- (a) creation of Chairs in reputed educational institutes, (b) contribution to funds (not being an investment fund) promoted by educational institutes; and (c) contribution to a technical institution or body or association in the field of activity of the donor Company.
The commission, per transaction, to agents abroad for the sale of residential flats or commercial plots in India up to USD 25,000 or five percent of the inward remittance whichever is less.

Remittances up to USD 10,000,000 per project for any consultancy services in respect of infrastructure projects and USD 1,000,000 per project, for other consultancy services procured from outside India.
Remittances up to five percent of investment brought into India or USD 100,000 whichever is less, by an entity in India by way of reimbursement of pre-incorporation expenses.

Remittances up to USD 250,000 per financial year for purposes stipulated under Para 1 of Schedule III to FEM (CAT) Amendment Rules, 2015. However, all residual current account transactions undertaken by such entities are otherwise permissible without any specified limit and are to be disposed off at the level of AD, as hitherto. It is for the AD to satisfy themselves about the genuineness of the transaction.
Anything in excess of above limits requires prior approval of the Reserve Bank of India.


Q 25. Can a resident individual make a rupee loan to a NRI/PIO who is a close relative of resident individual, by of crossed cheque/ electronic transfer?

Ans. A resident individual is permitted to make a rupee loan to a NRI/PIO who is a close relative of the resident individual (‘relative’ as defined in Section 2(77) of the Companies Act, 2013) by way of crossed cheque/ electronic transfer subject to the following conditions:

(i) The loan is free of interest and the minimum maturity of the loan is one year.

(ii) The loan amount should be within the overall LRS limit of USD 2,50,000, per financial year, available to the resident individual. It would be the responsibility of the lender to ensure that the amount of the loan is within the LRS limit of USD 2,50,000 during the financial year.

(iii) The loan shall be utilised for meeting the borrower’s personal requirements or for his own business purposes in India.

(iv) The loan shall not be utilised, either singly or in association with another person, for any of the activities in which investment by persons resident outside India is prohibited, namely; the business of chit fund, or Nidhi Company, or
agricultural or plantation activities or in real estate business, or construction of farmhouses, or trading in Transferable Development Rights (TDRs). Explanation: For the purpose of item (c) above, real estate business shall not include development of townships, construction of residential/commercial premises, roads, or bridges.

(v) The loan amount should be credited to the NRO a/c of the NRI /PIO. Credit of such loan amount may be treated as an eligible credit to NRO a/c.

(vi) The loan amount shall not be remitted outside India.

(vii) Repayment of loan shall be made by way of inward remittances through normal banking channels or by debit to the Non-resident Ordinary (NRO)/ Non-resident External (NRE) / Foreign Currency Non-resident (FCNR) account of the borrower or out of the sale proceeds of the shares or securities or immovable property against which such loan was granted.


Q 26. Can a resident individual make a rupee gift to an NRI/PIO who is a close relative of the resident individual, by of crossed cheque/ electronic transfer?

Ans. A resident individual can make a rupee gift to an NRI/PIO who is a close relative of the resident individual [relative’ as defined in Section 2(77) of the Companies Act, 2013] by way of crossed cheque /electronic transfer. The amount should be credited to the Non-Resident (Ordinary) Rupee Account (NRO) a/c of the NRI / PIO and credit of such gift amount may be treated as an eligible credit to NRO a/c. The gift amount would be within the overall limit of USD 250,000 per financial year as permitted under the LRS for a resident individual. It would be the responsibility of the resident donor to ensure that the gift amount being remitted is under the LRS and all the remittances made by the donor during the financial year including the gift amount have not exceeded the limit prescribed under the LRS.

1 A ‘person resident in India’ is defined in Section 2(v) of FEMA, 1999 as :
(i) a person residing in India for more than one hundred and eighty-two days during the course of the preceding financial year but does not include-
(A) a person who has gone out of India or who stays outside India, in either case-
(a) for or on taking up employment outside India, or
(b) for carrying on outside India a business or vocation outside India, or
(c) for any other purpose, in such circumstances, as would indicate his intention to stay outside
India for an uncertain period;

(B) a person who has come to or stays in India, in either case, otherwise than-
(a) for or on taking up employment in India, or
(b) for carrying on in India a business or vocation in India, or
(c) for any other purpose, in such circumstances as would indicate his intention to stay in India for an uncertain period;
(ii) any person or body corporate registered or incorporated in India,
(iii) an office, branch or agency in India owned or controlled by a person resident outside India,
(iv) an office, branch or agency outside India owned or controlled by a person resident in IndiSource


Source: RBI website updated as on 13th February 2019


June 18, 2021

Are you a financial professional, real estate broker, chartered accountant, lawyer, estate planner or such other professional providing services to HNIs and Ultra HNIs?

Do you wish to avail of a new earning opportunity?

It would be interesting for you to know that Indian HNIS remitted more than $4 billion US for their children’s education US last year, the overall remittance by HNIs being $14 billion US.

Most of your clients may be asking you –

  • How can they save on foreign education fees?
  • How can they invest in international property and create a global real estate portfolio?
  • How can they expand their business globally?
  • How can they procure a second passport and travel visa-free or obtain a visa on arrival to a maximum number of countries?
  • How can they enjoy a good quality of life by retiring abroad?
  • How can they obtain NRI status?
  • How can they structure their investment globally to make it tax efficient?

Does this sound familiar?

Do you wish to have answers to all these questions?

Then join Ajmera Law Group (ALG) – Global Investment Advisors, as an Associate and let us help you serve your clients in the best possible manner.

June 7, 2021

The rise in bank frauds and other economic offenses have attracted the attention of local and global media towards India. Lately, many fugitive economic offenders have been in the news, and thanks to them, we all now know where the tiny Caribbean islands of Antigua & Barbuda and Dominica are located on the world map!

As of today, the Indian government and its enforcement agencies are looking for more than 300 such offenders who have escaped from India. For the past few months, we have been constantly reading and hearing about a few ‘celebrity economic offenders’ in every Indian media. After spending crores of rupees and almost a week in Dominica, a private jet sent by the Indian government has returned back home with government top brass but without Mr. Mehul Choksi. Another Indian legal team is fighting in a London court to repatriate Mr. Nirav Modi and Mr. Vijay Maliya.

The scale of economic offenses in India and the way they are being handled have made India a hotbed for global agents and companies who assist such runaway criminals to obtain citizenship in another country.  These companies operate in India as a legitimate business but they are infamous globally for such activities. The fact they are operating in India openly makes one wonder why the Indian government and its allied agencies are not restricting their activities. In fact, to a common man, it seems as if the Indian government has spread a red carpet for such foreign companies to operate in India.

In 1975, when economic liberalization had started in the UAE and the Middle East, a large number of Indian laborers and workers were recruited to work in these countries. The agents and intermediaries in India often took advantage of these workers, who were poor and desperate to earn money. We have heard many horror stories about such frauds and scams during this time.

Finally, in 1983, the Migration Act was introduced by the Indian government which required foreign recruitment agencies and foreign employers to register with the Indian government if they wished to recruit manpower from India. Thanks to this Act, we now see a lesser number of foreign job frauds being reported in India. Originally this act was managed by the Ministry of Labour, but now it is managed by the Ministry of External Affairs of the Government of India.

Coming back to the present scenario, if the Indian government does act decisively, history will repeat itself. The problem is two-fold:

  1. Indian citizens are likely to become victims of global economic fraud perpetrated by foreign companies (financial and real estate sector) who target wealthy Indian investors. The work of such foreign companies is made easier by a lack of government control.
  2. There are many global companies, agents, and consultants who assist Indian economic offenders and criminals to escape from India. At present many such foreign companies have entered and are operating a business in India because there is no law that stipulates that they need a license or permit to open an office and conduct business in India.

Foreign companies and agencies started developing an interest in the Indian market when the Indian government opened its doors for outbound investment in 2008 under the Overseas Direct Investment (ODI) for Indian entities and under the Liberalized Remittance Scheme (LRS) for Indian citizens.

As per RBI data, up until now US$ 60-80 billion has been remitted or invested outside of India under each of the aforementioned schemes in the last 12 years. This makes India a very attractive destination for foreign government agencies and companies who wish to lure Indian companies and wealthy Indian citizens to make an investment in their country or investment products.

Under the Foreign Exchange Management Act (FEMA), there are a series of RBI regulations, master circulars, and clarifications that specify how Indian companies can invest abroad or how Indian citizens can remit or invest money outside of India.

On the other end, there is no regulation under FEMA, or any other known regulation or act in India for that matter, to test the legitimacy of the foreign company or investment product in which Indian companies or Indian citizens make investments. These foreign entities are also not required to register with any Indian government agency or department.

Many legitimate foreign investment companies are surprised that they can come to India and offer their investment product (financial or real estate) without having to register with any Indian authority.

Let us see some examples that prove how easy things are for foreign companies as compared to indigenous companies/individuals:

  • Indian real estate developers and brokers/agents must register under RERA but foreign real estate developers and brokers do not need to register with any Indian government authority to market their real estate project in India. As per the RBI, Indian citizens invested almost US$ 86.4 million (Rs. 650 Cr.) in global real estate in the year 2019-20.
  • Indian companies and entities offering financial products and financial advice must register with the Security and Exchange Board of India (SEBI). However, foreign companies and financial advisors can come to India, open an office and offer their products/services to Indian citizens without any kind of registration or obtaining any kind of permit from an Indian authority. As per the RBI data, Indian citizens invested US$ 1054.78 million (Rs. 7910 Cr.) outside of India in global equities and deposits in the year 2019-20. It is estimated that this number will jump significantly in the current year.
  • Indian education institutes that wish to recruit Indian students in India must register with several government entities. On the other hand, foreign education institutes can enter the Indian market, appoint agents and recruit students from India for study in their respective country without any governmental interference. This apathy and lack of any regulatory body that oversees the operation of such foreign entities in India has resulted in widespread student recruitment scams and the proliferation of fraudulent education institutions in countries like America, Canada, and Russia.

As per the RBI data, in the year 2019-20 Indian parents remitted US$ 4989.04 (Rs. 373,178 Cr.) in foreign education fees for their children studying abroad. Additionally, US$ 5341.99 (Rs. 400,649 Cr.) was remitted for living expenses and as a gift.

Though such a large industry exists in India for foreign student recruitment, neither the student visa agents and consultants nor the recruiting foreign education institutions are regulated in India by the government.

In the year 2017, a major fraud was reported that involved an American university. Hundreds of Indian students were affected and their career and future were ruined by this scam. At that time, the External Affairs Minister, Late Mrs. Sushma Swaraj, was shocked to see the condition of the Indian students and she tried her best to revise the Migration Act. However, due to her untimely death, this Emigration Bill of 2019 is still pending with the Ministry of External Affairs.

Further irony concerning this matter is that the Indian government and all major Indian banks now offer bank loans to Indian students for foreign education with basic documentation. However, these same banks and financial institutions will ask for a pile of documents if an Indian citizen wants to make an investment in the U.S. or global stock market which is highly regulated.

  • There is no licensing and regulatory body in the immigration and visa industry in India. This has allowed foreign immigration law firms and visa consulting firms to enter the Indian market by simply registering a company in India, hiring Indian staff members, and renting a physical/virtual office in India. To attract their target audience, these companies regularly release advertisements or press notes in the Indian media and highlight how many Indian HNIs, and UHNIs have left India. These reports are based on vague estimations and serve no purpose other than inciting readers to have a go at a chance to immigrate to a foreign country.


A number of foreign immigration law firms continue to operate in India even after the Supreme Court of India’s ruling that foreign lawyers cannot practice law in India, nor can they open an office in India or make frequent visits to India to meet Indian clients. Based on this judgment, RBI issued a notification directing Indian financial institutions and banks to refrain from opening an account for such foreign law firms. However, the reality is totally different. Many foreign law firms are still operating freely in India. A remote-controlled company operation, which is allowed in India, could be an ideal place for global illegitimate operators.

Many global consulting firms representing governments of small countries and independent islands are also operating in India. These firms acting as marketing agents for these small countries that offer residency and/or citizenship by investment (RCI) programs. Paid by foreign governments, these consulting firms pitch the RCI programs in India on behalf of the foreign governments.

Mr. Mehul Choksi had obtained the citizenship of Antigua & Barbuda by investing a sizeable amount of money in the tiny Caribbean island of Antigua & Barbuda just a few months before the PNB scandal broke in India.

Invest above amount and receive a second passport in few months!!!

Many high-profile Indian celebrities and prominent individuals have obtained citizenship or residency in foreign countries.  Very recently a famous Bollywood star was in the news for having been granted residency in a Middle East country.

All these particular service industries are open-ended and highly unregulated in India. Unless and until the Indian government seriously acts to close the loopholes, an increasing number of economic offenders will run away from India. Private jets (funded by hard-working taxpayers’ money) will then have to be sent to bring them back to India to face justice.  

June 3, 2021

The Reserve Bank of India (RBI) confirmed on May 31 that banks and other regulated entities cannot cite its 2018 circular on cryptocurrencies because it was set aside by the Supreme Court (SC) in March 2020. The RBI stated that the circular is no longer effective as of the date of the SC ruling and that it cannot be referred to or quoted from.

This clarification follows a series of previous investor communications from banks like HDFC and SBI, which highlighted a 2018 circular to warn investors about the “uncertain regulatory landscape” in this industry. Investors were urged to understand the nature of these transactions and to be mindful of the hazards connected with crypto and virtual currencies.

The circular does, however, include a cautionary warning about banks performing due diligence in cryptocurrency concerns. Banks were told to maintain complying with KYC (Know-Your-Customer) and AML (Anti-Money Laundering) requirements, among other things.

“We welcome the move from the RBI to clarify the stand around the old circular which was set aside by the honorable Supreme Court. I hope the confusion around the same ends now. We also respect the concern the banks may have around AML (anti-money laundering) policies and discussions around the same will make the industry stronger, and investors and investments safer.” said Sumit Gupta, CEO, and Co-founder, Coin DCX.

Due diligence, on the other hand, is a legal requirement that all financial institutions must fulfill. All of this leads to a bright future for the booming crypto business, which has been hampered by ambiguous government policies and laws.

Despite the country’s ambiguous cryptocurrency landscape, Indians have invested more than $1 billion in the cryptocurrency market, making India one of the top virtual currency trading countries.

Experts believe there is now a chance for substantial industry-government collaboration on crypto-related policies. “This is very positive for the ecosystem and it feels like overall consensus within the government and regulatory bodies are against stifling innovation and growth in the Crypto ecosystem in India,” Sandeep Naliwal, Co-Founder and Chief Operations Officer at Polygon, an Indian blockchain scalability platform, said.

When Mark Cuban of Shark Tank fame invested in Polygon, the company skyrocketed in popularity. Polygon’s native token, Matic, has risen in value from $26 million upon its start in 2019 to moreover $14 billion in recent months.

RBI’s statement to banks on cryptocurrency investments clears their position on whether customers are legally allowed to invest in crypto. Instead of denying service to their customers based on an invalidated circular, it is time banks came on board the crypto investment bandwagon, allow the crypto exchanges to hold accounts with them, and enable customers to make investments via all possible options, including UPI and bank transfers. Cryptocurrencies are the future and we must ensure we stay at the forefront of this technology”, emphasizes Ashish Singhal, CEO, Coinswitch Kuber.

With RBI’s consent and clearance on the trading of cryptocurrency and an increasing number of businesses and individuals embracing cryptocurrencies and the underlying blockchain applications, formal regulation of the sphere is no longer a pipe dream. As the government strives for increased financial inclusion and engagement, it is critical that a suitable environment be created to make this possible.

This article is contributed by Ms. Dishita Sheth, Intern at Ajmera Law Group

June 2, 2021


There has been a paradigm shift in the mindsets of people that have existed for centuries which has switched dramatically. As record-high inflation rates have surpassed, lifestyles that have been built over decades can no longer be sustained by the current existing income levels. Investors today are weighing their alternatives to building a luxurious and comforting lifestyle

Todays’ twenty-first-century Investor is well versed and cognizant about the functioning and performances of markets around the globe. Geographic blockades no longer seem to be a hindrance for pursuing contemporary and advanced investment prospects and for generating exceptional returns for the investors. Investors are now switching to Global Funds, which enables and permits them not only to expand but also diversify their portfolio and invest globally

A Global Mutual fund is one that invests in businesses all over the world, including those in the investor’s home country. It aims to find the best investments for the investor from a large pool of securities around the world. A global fund can be either engaged in a single asset class or can be spread over many.

Structure of Global Mutual Funds

  • Direct Investment

There are assets that are managed directly by a local fund manager. Rather than relying on an offshore investment manager, the local fund manager ensures that your portfolio is well-managed and orchestrated

  • Indirect Investment   

They are referred to as Feeder Funds which pool money from local investors and then transfer the corpus to the parent fund, which is administered offshore, OR pure fund of funds, which invest the investor’s money in a portfolio of offshore funds,

  • Mix Investment (Foreign + Domestic)

These funds have a mix of both domestic and international mutual funds. As a result, they are a safer option for moderate risk-takers because they have reduced exposure to global equities while keeping an emphasis on the domestic market, which improves and enhances the tax efficiency of the portfolio.

  • Specific Region Investment

While selecting the Global Mutual Funds, the investor can invest in a specific country or region of her/his choice. The Investor needs a thorough understanding of the region/country she/he chooses to analyze the growth potential, returns, and exit at the appropriate time

These funds are more versatile because they are not limited and restricted to a specific region or country and it can provide investors with a more diversified exposure. These are usually managed by Fund managers, who have the requisite skills and proficiency in managing an investor’s portfolio and can identify and analyze prospects from all different parts of the world

  • Specific Theme Investment

These funds invest globally in particular themes or growth prospects. The Investor may invest in minerals, oil, gold, agriculture, mines, and other diverse themes or sectors. These funds are perfect to invest in during a growth cycle because they give investors access to segments that aren’t present in the domestic market. But the Investor must make that their portfolio isn’t overburdened by these types of assets, as limited exposure to a single theme will put investors at risk

Why Invest in Global Mutual Funds?

Diversification and Growth

It helps the investor to spread their Investment Portfolios among various foreign companies, markets, and securities in addition to their home country’s, as Global Mutual Funds invest into a wide range of securities in different parts of the world in different industries giving the Investors’ diversification in multi-folds (geographical, currency, industry). As a result, the risks that the volatility of a single security or the uncertainty in a single country or currency would have an adverse impact on the portfolio’s overall performance are reduced.

Hedge against Currency 

When we look at the rupee’s pattern in relation to the dollar, It is evident that it has just declined greatly. The Indian rupee which was worth Rs. 45 in 2000, is now worth Rs. 75. There are a variety of reasons for this depreciation, varying from global turbulence to growing inflation to venal bureaucracy to poor fiscal policies. Today, Investing in Global funds will help you take advantage of the rupee’s depreciation. By investing in rupees, you gain exposure to foreign exchange as you invest in these global funds. Any increase in the value of the foreign currency, as well as any decrease in the value of the domestic currency, would increase the investor’s returns. Since they offer a hedge against currency fluctuations, they must be included in the Investor’s Portfolio


For tax purposes, all mutual funds that invest in global markets are referred to as Non-Equity funds. As a result, Tax levied on Global Funds are in the following manner:

– The Investor sells the units within three years of the time when she/he bought them, the gains are credited to her/his taxable income and charged according to the slab rate. (Short Term Capital Gains)

The Investor sell the units after three years from the date of acquisition, the gains are levied at a rate of 20%, and indexation advantages (Long Term Capital Gains)


Investors should treat global mutual funds as a tactical allocation and keep a close eye on them while they are investing in the same, as the returns from these funds are not necessarily in line with those from Indian Mutual funds. Effectively, once the investor invests in those accounts, be mindful of both the advantages and disadvantages. Begin with small investments to get a better understanding of how those investments function before committing to larger investments in a foreign mutual fund. Invest only after you’ve developed a well-diversified exposure to mutual fund investments in India, and give yourself 5-7 years to do so.

This article is contributed by: Ms. Dishita Sheth, Intern at Ajmera Law Group 




June 1, 2021

The investor considers the products and services that they use daily. It could be anything ranging from shopping on Amazon to streaming movies on OTT platforms like Netflix to the most common, searching for things on Google. Many of these businesses are based outside of India and do not trade on Indian stock exchanges. Why should the 21st Century Investor invest in such global giants?

In the early 1960s, the advantages of foreign diversification were empirically illustrated in financial literature. A few empirical studies have shown that Investors may reduce the chance of their portfolio returns at a significant level of projected return by diversifying through countries whose business cycles were not ideally aligned. We are all well aware that the top Multinationals, Best performing, and High yielding companies also change regularly.

As a result, concentrating all of one’s savings in a single area or asset class is not an effective idea. Another perspective is to profit from the weakening currency. As a result, having a geographically diversified portfolio is a Smart and Sound strategy.

Strategic investment is a craft, and as investors become more knowledgeable of the benefits of equity investing, they are increasingly looking to invest in businesses headquartered in other countries. With most countries’ economies improving, Indian institutional investors are diversifying and broadening their investment horizons to benefit from massive returns on global stock markets.



This is most likely the most effective and relatively simpler way for investors to gain foreign exposure at a low-cost option. Many Indian fund houses offer such overseas equity investment schemes. For example, a well-known fund house provides index funds that monitor and tracks Nasdaq 100 indices in the United States. Their taxation is almost the same as that of debt funds in India, which means that someone who retains for more than three years is taxed at 20% with indexation.

Few investors may be resistant to global diversification, believing that today’s world is so intertwined that foreign investments may overlap domestic ones. However, this is not the case, since businesses prefer to behave in ways that are dictated by the situation in their home country. They are more likely to respond to local economic and geopolitical issues than to events occurring beyond their boundaries.


Investors can do so by sending money abroad via the Reserve Bank of India’s Liberalized Remittance Scheme (LRS), which has an annual cap of $250,000 (Approx. 1.8 Cr). The LRS cap expands the range of stocks and funds available to an investor beyond the small selection offered by Indian MUTUAL FUNDs. Transferring capital overseas, on the other hand, is costly as it requires more paperwork, and makes tax filing more difficult for Indian investors.

Besides that, foreign investment takes place in the shadow of official disapproval, particularly when done via the LRS pathway. Aside from the newly implemented TCS, foreign contributions must be registered annually under Schedule FA of the Income Tax returns, and omissions will result in the investor is subject to India’s strict black money laws.

Furthermore, foreign nations such as the United States collect their withholding taxes on dividends, which must be demanded back from India under the Double Taxation Avoidance Treaty (DTAA), which adds an extra layer of paperwork to the process 


Global diversification is a well-known investment strategy. It encapsulates the notion that a global portfolio is best secured against country-specific threats like economic recession or political unrest. Investors will also share in the gains of multinational corporations through global earnings.

International securities may provide significant diversification, improving the estimated risk-return profile of a total portfolio as compared to a portfolio that only contains Indian equities. This advantage stems from buying shares in several countries, each of which reacts to market and economic conditions differently

Investors can diversify their portfolios by owning shares denominated in a variety of currencies, each of which behaves differently from the underlying stock price. Different economies and currencies respond to business cycles and global developments in their distinct ways. Investors can reduce total portfolio uncertainty by using these offsetting trends, resulting in a smoother ride with comparable returns as compared to investing solely in Indian Stocks

Depending on whether it is measured in dollars or purchasing power parity, India’s share of the global economy ranges from 3 to 8%. As a result, taking part in the rise of the remaining 92-97 percent of the planet is a clear gain. The United States is a desirable destination.

Apple, Alphabet, Dell, IBM, Procter & Gamble, Facebook, and other global technology giants are listed on the New York Stock Exchange. The rupee’s depreciation against the dollar is another major factor for Indian investors to engage in foreign investment

International securities are viewed as unlisted stocks and are thus taxed at 20% of indexation on retention periods of more than two years. Gains in them are charged at a slab rate on shorter retention times.

To conclude, it is beneficial for investors to diversify internationally, and foreign diversification aids in risk management and portfolio planning for long-term development.

This article is contributed by: Ms. Dishita Sheth, Intern at Ajmera Law Group 

April 12, 2021

 Can you explain who are the main players of the U.S. financial market?

The U.S. financial market comprises of several players such as:

  • corporations and governments issuing securities
  • persons and corporations buying and selling a security
  • the broker-dealers and exchanges which facilitate such trading of securities
  • banks which safe keep assets, and
  • regulators who monitor the markets’ activities.

The U.S. system is more complex as there are multiple players in each of the above categories.

  1. Who are the players in each of the above categories in the U.S.?

 As we are aware, securities are issued by a company or the government to raise capital either as debt or equity. Debt and equity may be issued in various forms such as bonds, notes, debentures for debt and common or preferred shares for equity. Issues may be sold privately to investors, or sold to the public via the various markets described below.

  • An investor is a person or corporate entity that makes an investmentby buying and selling securities.

There are two sub-categories of these investors:

  1. Individual person making investment in the securities for himself
  2. Institutions which make investments on behalf of a third party who is their client, such as investment and hedge fund managers.
  • A broker-dealeris a natural person, company or other organization that engages in the business of trading securities for its own account or on behalf of its customers.

All broker-dealers must be registered with the Financial Industry Regulatory Authority, Inc. (FINRA) or a national securities exchange or both, depending on the securities they are dealing with.

Commodity brokers include Futures Commission Merchants, Commodity Trading Advisors and Commodity Pool Operators. They must register with the National Futures Association (NFA).

A stock exchange is a physical or digital place to which brokers and dealers send, buy and sell orders in stocks/shares, bonds, and other securities.

In the USA, there are several exchanges and within the same exchange there are several markets depending on the type of securities or commodities to be traded.

The following are the U.S. Exchanges for equities, options, futures and derivatives:

  1. For Equities – There are multiple exchanges in the U.S. such as the New York Stock Exchange (NYSE), National Association of Securities Dealers Automated Quotations (NASDAQ) and BATS Global Markets.
  2. Options on equities – Similar to equities, but including the Chicago Board Options Exchange and the International Securities Exchange.
  3. Futures and derivatives – The Chicago Mercantile Exchange, including its acquisitions of similar exchanges, is the sole venue for many derivative contracts that must be cleared at the same exchange.
  4. Energy related derivatives – The Intercontinental Exchange dominates energy related derivative trading, again with its own clearing arrangements. This exchange is owned by

It must also be noted that the U.S. government debt securities do not trade on exchanges. They are bought by primary dealers and resold to other broker-dealers and institutional investors.

 The next players in the security market are the banks and such other institutions that are the custodians of the securities for the safe keeping.

There are four main players:

  • Custodian banks – They offer active safekeeping and administration of clients’ securities portfolios.
  • Prime brokers – They are broker-dealers who offer custody and other services to hedge funds.
  • Transfer agents – They provide a variety of services to issuing companies, including maintaining a registry of all shareholders, paying dividends and conducting proxy campaigns.
  • Central securities depositories and clearing organisations. 

There are three central securities depositories and they are – 

  • The main securities depository is the Depository Trust Company, a subsidiary of the Depository Trust & Clearing Corporation (DTCC)
  • The Federal Reserve for all U.S. government bonds and notes
  • The Chicago Mercantile Exchange (CME) for futures and other derivative contracts

There are four clearing organizations in the U.S. and they are –  

  • National Securities Clearing Corporation, a subsidiary of DTCC, for market-traded stocks and corporate bonds
  • Fixed Income Clearing Corporation, also a subsidiary of DTCC, for government bonds and mortgage-backed securities
  • Options Clearing Corporation (OCC) for all equities related options
  • Intercontinental Exchange (ICE) for energy related derivative contracts

U.S. equities, corporate and municipal bonds can be issued in certificated form, though this practice has been largely replaced due to the costs and inefficiencies of keeping them. Rather, holdings are kept as “immobilized” or “street name”, with the beneficial owners keeping them in accounts at broker-dealers and banks, just as they do for currencies.

Options, futures and other derivatives are traded based on contracts, rather than certificates. OCC, CME and ICE act as clearing agents and repositories, keeping track of book entry positions among the various clearing brokers.

U.S. government bonds and notes are un-certificated (dematerialized), which means that certificates are never issued. Instead, the clearing brokers keep book entry positions at the Federal Reserve on behalf of their various clients.

The Financial Stability Oversight Council has designated each of these institutions, with the exception of the Federal Reserve, as a systemically important financial market utility.

  • The last and most important players are the regulators.

The securities markets are overseen by –

  • the Security and Exchange Commission (SEC),
  • by individual state securities commissions established under blue sky laws, and
  • the self-regulatory organizations, which are overseen by the SEC.

Nationally, there are two commissions regulating the trading of securities:

  • The first is the U.S. Securities and Exchange Commission (SEC), which governs equities, equity options, corporate bonds, and municipal bonds.

The SEC is an independent agency of the United States federal government. It also holds primary responsibility for enforcing the federal securities laws, proposing securities rules and regulating the securities industry, the nation’s stock and options exchanges, and other activities and organizations, including the electronic securities markets in the United States.

The SEC falls under the responsibility of the U.S. Senate Committee on Banking.

The CFTC oversees designated contract markets (DCMs) or exchanges, swap execution facilities (SEFs), derivatives clearing organizationsswap data repositoryswap dealers, futures commission merchants, commodity pool operators and other intermediaries.

The CFTC falls under the oversight of the U.S. Senate Agriculture Committee.

  1. Can you give us a brief history of the New York Stock Exchange (NYSE) and NASDAQ?

The New York Stock Exchange dates back to May 17, 1792. On that day, 24 stockbrokers from New York City signed the Buttonwood Agreement at 68 Wall Street.

The New York Stock Exchange started with five securities, which included three government bonds and two bank stocks.

Along with American stocks, foreign-based corporations can also list their shares on the NYSE if they adhere to certain listing standards.

A series of mergers has given the New York Stock Exchange its massive size and global presence. The company started as NYSE before merging with the Euronext and adding the American Stock Exchange.

NYSE Euronext was purchased in an $11 billion deal by the Intercontinental Exchange (ICE) in 2013. The following year, Euronext demerged from ICE via an initial public offering (IPO), but ICE retained ownership of the NYSE.

NASDAQ officially separated from the NASD and began to operate as a national securities exchange in 2006. In 2007, it combined with the Scandinavian exchange group OMX to become the NASDAQ OMX group, which is the largest exchange company globally, powering 1 in 10 of the world’s securities transactions.

Headquartered in New York, NASDAQ OMX operates 25 markets – primarily equities, and also including options, fixed income, derivatives and commodities – as well as one clearing house and five central securities depositories in the U.S. and Europe. Its cutting-edge trading technology is used by 70 exchanges in 50 countries. It is listed on the NASDAQ under the symbol NDAQ and has been part of the S&P 500 since 2008.

Since 2008, a number of mergers and acquisitions have made NASDAQ one of the largest exchange companies in the world. 

  1. What is the difference between NYSE and NASDAQ?

The first difference is the place or location of doing business.

The NYSE still retains a physical trading floor on Wall Street in New York City. A significant portion of trade flows through its data center in Mahwah, New Jersey.

The NASDAQ, on the other hand, does not have a physical trading floor. At both data centers, trading takes place directly between investors seeking to buy or sell, and market makers through an elaborate system of companies electronically connected to one another.

The second difference is that for NYSE, the market opens and closes at a fixed time. It is by the auction method that NYSE stock prices are set. Before the market’s 9:30 a.m. official opening time, market participants can enter, buy and sell orders starting at 6:30 a.m. These orders are matched with the highest bidding price paired with the lowest asking price. Orders for the closing auction are accepted until 3:50 p.m., and orders can be cancelled up until 3:58 p.m

The NASDAQ is a dealer market. Market participants do not buy and sell to one another directly. Transactions go through a dealer which, in the case of the NASDAQ, is a market maker.

The third difference is that at the NYSE, the job of maintaining markets falls upon Designated Market Makers (DMMs), formerly known as specialists.

At the NASDAQ, market makers maintain inventories of stock to buy and sell from their own accounts in transactions with individual customers and other dealers.

The forth difference is, it is more expensive to be listed on NYSE than on NASDAQ.

  1. What is the over-the-counter market (OTC) in the U.S.?

Over-the-counter (OTC) market refers to the process of how securities are traded via a broker-dealer network as opposed to a centralized exchange. Over-the-counter trading can involve equities, debt instruments and derivatives, which are financial contracts that derive their value from an underlying asset such as a commodity.

In some cases, securities might not meet the requirements to have a listing on a standard market exchange such as the New York Stock Exchange (NYSE). Instead, these securities can be traded over-the-counter.

However, over-the-counter trading can include equities that are listed on exchanges and stocks that are not listed. Stocks that are not listed on an exchange, and trade via OTC, are typically called over-the-counter equity securities or OTC equities.

  1. Can you explain who is a broker–dealer?

A broker-dealer is a person or firm in the business of buying and selling securities for its own account or on behalf of its customers.

The term broker-dealer is used in U.S. securities regulation parlance to describe stock brokerages because most of them act as both agents and principals.

A brokerage acts as a broker (or agent) when it executes orders on behalf of its clients, whereas it acts as a dealer (or principal) when it trades for its own account.

Broker-dealers fulfil several important functions in the financial industry.

These include –

  1. providing investment advice to customers
  2. supplying liquidity through market making activities
  3. facilitating trading activities
  4. publishing investment research and
  5. raising capital for companies.

Broker-dealers range in size from small independent boutiques to large subsidiaries of giant commercial and investment banks.

There are two types of broker-dealers:

  1. a warehouse or a firm that sells its own products to customers; and
  2. an independent broker-dealer or a firm that sells products from outside sources.

There are over 3,700 broker-dealers to choose from, according to the Financial Industry Regulatory Authority (FINRA).

  1. How one can become a broker-dealer in the U.S.?

The Financial Industry Regulatory Authority (FINRA) is the main regulatory authority for broker-dealers. To register, securities professionals must pass qualifying exams administered by FINRA to demonstrate their competence in the particular securities activity in which they plan to work. An individual must pass the exams prior to engaging in those areas of practice.

There are more than 25 examinations for each type of practice that professionals working in the financial industry must take.

Some of the important examinations are:

  • Securities Industry Essentials (SIE) – general examination as a foundation course.
  • Series 3 – National Commodities Futures Exam
  • Series 6 – Investment Company and Variable Contracts Products Representative Exam
  • Series 7 – General Securities Representative Exam 
  1. What are the major indices of the NY stock market?
  • Dow Jones Industrial Average (DJIA)

The Dow Jones Industrial Average is an index of 30 “blue chip” stocks of U.S. industrial companies.

  • NYSE Composite Index

The NYSE Composite Index tracks the price movements of all common stocks listed on the New York Stock Exchange.

  • S&P 500 Composite Stock Price Index

The Standard & Poor’s 500 Composite Stock Price Index is a capitalization-weighted index of 500 stocks intended to be a representative sample of leading companies in leading industries within the U.S. economy.

  • Wilshire 5000 Total Market Index

The Wilshire 5000 Total Market Index is intended to measure the performance of the entire U.S. stock market

  • Russell 2000® Index

The Russell 2000® Index is a capitalization-weighted index designed to measure the performance of the 2,000 smallest publicly traded U.S. companies based on in market capitalization.  The Index is a subset of the larger Russell 3000® Index.

  • NASDAQ-100 Index

The NASDAQ-100 Index is a “modified capitalization-weighted” index designed to track the performance of the 100 largest and most actively traded non-financial domestic and international securities listed on the NASDAQ Stock Market.

Do you wish to invest in NYSC and NASDAQ market, visit AjmeraCapital.com – Market place for global investing from India.


April 12, 2021

Tips for Indian business persons and start-ups to enter the UK market and expand their business across Europe!

  1. Why is London, UK, an important centre for the financial markets of the world?

Ans: The UK has almost 475 years of financial market history, which has undergone major changes over time to meet the demands of the market. At the same time, the UK as a country continues to protect investors by regulating the financial market and its players quite vigilantly.

The UK stock market has survived several wars and pandemics in the last 475 years. At the present time, it provides several platforms and products to attract investors not only from within the UK and Europe but also from around the world.

The UK financial market is evolving to keep up with the times and is far from being a stagnant market. It is a continuous work in progress.

In addition, the UK is in the GMT time zone, which makes it easy to follow Asian and North American markets during the same day. This also makes traveling to and from London easy around the world.

  1. Can you provide us with a brief history of the UK financial market and how the London Stock Exchange (LSE) came into existence?

Ans:  The Royal Exchange was founded by English financiers, Thomas Gresham and Sir Richard Clough, and was based on the model of the Antwerp Bourse. It was inaugurated by Queen Elizabeth I of England in 1571. At the time it was not accessible to stockbrokers because the elite class considered their behaviour as uncouth. Hence the trading of stock and commodities took place in the coffee houses of London.

Stocks grew and money was raised by the new companies and also the royal court. This was the start of organised trading in marketable securities in London, and perhaps the world.

In 1669, the Royal Exchange building was rebuilt and the exchange was re-established after being destroyed during the Great Fire of London in 1666. The Royal Exchange housed not only brokers but also merchants and merchandise. This was the birth of a regulated stock market.

It was in 1773 when a new and more formal “Stock Exchange” was opened in Sweeting’s Alley. An entrance fee was introduced on a daily basis and from then on, an annual fee was charged. However, as there were no trading guidelines, frauds were rampant.

On 18th May, 1801, the foundation stone was laid for a new stock exchange building. It was finished on 30th December of the same year and the words, “The Stock Exchange”, were incised on the entrance.

The first rule book of the stock exchange was introduced in February 1812 that gave detailed definition of ‘settlement and default’.

Between 1820 and 1840, the foreign market at the Exchange allowed for merchants and traders to participate, and the Royal Exchange hosted all transactions where foreign parties were involved. The constant increase in overseas business eventually meant that dealing in foreign securities had to be allowed within all of the Exchange’s premises. This was a boom period for the financial market in the UK, which eventually became an integral part of London.

After going up and down for almost 100 years, the UK stock market finally came into prominence after the Second World War and a new stock exchange tower was opened in 1972.

The year 1973 was a land mark year in the history of London financial market. Firstly, it was marked by the admittance of both women and foreign-born members on the floor. Secondly, during this year, the London Stock Exchange formally merged with the eleven British and Irish regional exchanges, including the Scottish Stock Exchange.

On 3rd January, 1984, the Financial Times and the Stock Exchange partnered together to launch the FTSE 100 Index. This is one of the most useful indices of all, and tracks the movements of the 100 leading companies listed on the Exchange.

In 1991, when the Governing Council of the Exchange was replaced by a Board of Directors drawn from the Exchange’s executive, customer and user base, the trading name of the Exchange was changed to, “The London Stock Exchange” (LSE).

From the above history, one can easily see how the LSE has continuously evolved over centuries and adapted to changing times to meet the needs of business persons and investors.

  1. What is the “Big Bang” in context of the London / UK financial market and stock exchange and what are the major changes that followed the same?

Ans: In 1986, the UK financial market introduced a series of changes. The term ‘Big Bang’ was coined to describe these deregulatory measures that included eradicating fixed commission charges, removing the distinction between stockjobbers and stockbrokers on the London Stock Exchange and changing the open outcry market to electronic trading platforms.

The Big Bang was followed by major developments in the LSE, such as, the launching of the Alternative Investment Market (AIM) for smaller companies to expand into international markets in 1995.

In 1997, Electronic Trading Service, popularly known as known as SETS, was launched to give speed and efficiency to the market. This was followed by the introduction of CREST settlement services in 2000.

In the year 2000, a very unique thing happened. The London Stock Exchange went public and became a listed company on its own stock market. LSE thus transferred its role as UK Listing Authority to the Financial Services Authority (FSA-UKLA).

EDX London, an international equity derivatives business, was created in 2003 in partnership with OM Group.

In 2004, the London Stock Exchange moved to a brand-new headquarters in Paternoster Square, close to St Paul’s Cathedral.

In 2007, the London Stock Exchange merged with Borsa Italiana, creating the London Stock Exchange Group (LSEG).

Once again we can see that following the ‘Big Bang’, other major changes were introduced by LSE to incorporate technology and meet the growing demands of the investors. Not only that, but in order to allow small and medium sized companies to raise funds at the LSE, more than one exchange was created. This made LSE the most popular exchange around the world and many foreign companies launched their IPOs and listed on LSE.

  1. What are the various trading platforms or exchanges on the London Stock Exchange?

Ans: There is the Main Market of LSE and it is divided in to three segments – Premium, Standard and High Growth Segment. Each exchange is designed to cater to different sizes and types of companies to raise capital.

Premium Main Market is for the world’s leading companies with potential to join the FTSE UK Indices.

Standard Main Market is for core European listing standards for international issuers.

High Growth Segment is designed for innovative, high growth companies allowing additional flexibilities.

On the other hand, Alternative Investment Market (AIM) is a platform for small and medium size growth companies in need of access to capital to realise their growth and innovation potential. Growing companies from around the world and at different stages of development can join AIM.

For each of these markets, one needs to fulfil entry, listing, trading and compliance requirements.

Hence, rather than having just one market and platform, there are several markets and platforms available for different companies where they can raise the capital. This gives investors the choice and option to invest in different companies depending on their type and size. The indices corresponding with each platform gives investors a fair indication of the movement of the market so that they can make an informed decision about their investments.

  1. What will be effect of BREXIT on LSEG and its members?

Ans: Procedurally, the UK will officially cease to be a member of the EU as of 31st December, 2020. If there is no trade deal before this date, the UK will automatically drop out of the EU’s main trading arrangements (the single market and the customs union). In view of a negotiation stalemate, LSEG has already prepared a contingency plan. London based CBOE has set up an Amsterdam hub, while London based Aquis Exchange has set up a Paris hub.

LSEG has also launched the Turquoise platform which will give access to 19 European stock markets from a single account. Through this platform, LSEG offers market participants – including retail investors, institutions and SMEs, access to Europe’s capital markets. This platform has won the Financial News 2015 Award for Excellence in Trading and Technology for the Most Innovative Trading Product/Service.

  1. What is the size of the LSE market and how has it performed before, during and after COVID-19?

Ans:  If we talk about the Main Market, it is home to around 1,100 companies with a combined market cap of £3 trillion. The FTSE 100 cap is 1.81 trillion. Before the start of the COVID-19 pandemic, the FTSE 100 Index was at 7610 points. During the pandemic, the performance of LSE plummeted like every other market in the world and it went down to 4993 points. UK stocks recovered in November 2020 and in December 2020, it went up to 6578 points.

On the other hand, the FTSE AIM 100 Index was at 4973 points before the pandemic and during the pandemic it went down to 3006 points. In December 2020, it recovered beyond the pre-pandemic time and went up to 5470 points.

The FTSE Techmark 100 Index was at 6100 points before the start of the pandemic. It went down to 3800 points during the peak of the pandemic. In December 2020, it bounced back to 6200 points.

However, in the coming months, two main factors are likely to affect the market. The first – the nature of deal made with the EU following BREXIT, and second – the resurgence of the current pandemic and the efficacy of the COVID-19 vaccine in controlling this resurgence.

  1. How much foreign investment has come into the UK in the past few years?

Ans: According to UNCTAD’s World Investment Report 2020, FDI inflows to the United Kingdom fell for the second year in a row, reaching USD 59 billion in 2019, compared to USD 65 billion in 2018 and USD 101 billion in 2017.

FDI stock in 2019 was about USD 2 trillion, compared to USD 1430 billion in 2018. The United Kingdom was the 8th recipient of global FDI flows.

The BREXIT process has raised concerns among some investors about the increase in trade costs with Europe and the volatility of the pound sterling.

London remains the financial capital of Europe, home to the European headquarters of almost 60% of companies on the Fortune 500 ranking. Furthermore, Great Britain maintains a strong currency, despite its recent depreciation, and the country remains one of the most important European consumer markets.

The United Kingdom was eighth out of 190 economies in the Doing Business 2020 ranking established by the World Bank, gaining a position compared to the previous year.

  1. How is the real estate market doing in the UK?

Ans: As the UK has one of the largest financial markets in the world, it is home to several multinational companies. It is also home to many rich and famous personalities of the world. Hence, after the financial market, the UK real estate market has become one of the most favoured destinations for foreign investment, both into commercial as well as residential properties. This makes the UK, and in particular the city of London, one of the most expensive real estate markets in the world.

As per the UK Statistic Department report, the UK is the biggest commercial real estate market in Europe, followed by Germany and France.

In the UK, commercial property investments have increased since 2016, reaching 512 billion British pounds in 2018. This dynamic of the market is impacted by multiple factors.

Unsurprisingly, London is the biggest office real estate market in the UK, with a total of over 270 million square feet of office stock as of the third quarter of 2019.

These processes also affect the residential sector; increasing demand and subsequently house prices around bigger cities, and thus, causing concerns about affordable housing. The average house prices in London at 479,000 British pounds were nearly twice as high as in South West England.

  1. How has the COVID-19 pandemic affected the real estate market in the UK?

Ans: COVID-19 has affected the market considerably and in order to encourage the residential real estate market, the UK government has introduced the Stamp Duty Land Tax (SDLT) holiday.

Under this holiday, both UK and foreign citizens will be exempt from paying stamp duty until 31st March, 2021.

UK real estate is an attractive asset for international buyers, particularly when we look at the top end of the market. For example, in 2019 alone, non-UK residents were responsible for over half (55%) of all prime central London (PCL) property transactions. Its historical resilience and rate of capital growth over long-term periods ensures consistent market demand for bricks and mortar in London.

COVID-19 has not dampened this demand, particularly when it comes to buyers based in Hong Kong, mainland China, and Singapore. According to Beauchamp Estates, the amount of Hong Kong and mainland Chinese investment it handled into PCL property between December 2019 and June 2020 totalled $374 million. It also found that this group of buyers accounted for 20% of deals above 10 million pounds in the capital.

On top of this, the political situation in Hong Kong is compelling investors in the jurisdiction to consider stable markets with assets that can deliver modest capital growth in the medium to long term. The PCL property market is a popular destination, and based on the current circumstances, there is good reason to expect an influx of investment from these investors in the coming months.

Additionally, during the pandemic, many ultra HNI investors who wanted to invest more than 5 million pounds saw a bargain in investing in the London residential market and the demand went up by 30%. Many brokers offering prime Central London properties witnessed the busiest summer months during 2020. Properties with asking price of 6 million pounds in the year 2019 were sold for 4.65 million pounds during the pandemic.

On the other hand, because of the travel restrictions, the influx of foreign investors to the UK was reduced considerably during the pandemic resulting in bargain prices for local buyers as well in the lower to middle range residential sector.

  1. How can Indian business persons and start-ups enter the UK market and expand their business across Europe?

Ans: Last year, the UK government introduced the UK Start-Up Visa program and the Innovator Visa program to attract entrepreneurs, innovators and start –up founders to the country.

Under the Start-Up Visa Program of the UK, any start-up in the world can present their innovative idea to a Home Office designated organisation. If the idea is accepted, the start-up can set up a company in the UK. In general, the business idea must be innovative, viable and a scalable business venture. Indian start-ups have a good prospect of qualifying under this program.

Under the Innovator Visa program, a revenue generating company having an innovative business proposal and ready to invest a minimum of 50,000 British pounds, may qualify for the Innovator Visa of the UK. The endorsing body must confirm that the business is active, trading and sustainable.

Obtaining this Innovator Visa can eventually lead to an indefinite right to live in the UK, and  subsequently to citizenship.

  1. What are the new announcements made by the UK government to attract international students and professionals?

Ans: As the UK moves towards BREXIT, the government has announced new immigration rules to attract international professionals to the UK. Under these rules, foreign nationals should have a job offer from a government approved UK company and meet education, experience, language, minimum pay and other security requirements.

There are two types of visas available for skilled workers and professionals:

  1. Temporary visa (Work permit)
  2. Permanent visa (Indefinite right to live in the UK)
  3. Does the UK have any investment based program for granting residency?

Ans: The UK immigration rules are set to attract investors, entrepreneurs, and people of talent. The investor category is designed to allow wealthy individuals, who make a substantial financial investment in the UK, to obtain permission from the UK to enter as an investor under the Tier 1 category.

It requires an investment of at least 2,000,000 British pounds either in British corporate bonds, share capital or loan capital in active and trading UK registered companies. This is one of the fastest and most secure ways to obtain UK residency. One can be approved in as little as 10 weeks!

January 1, 2021

Portugal: From an economic disaster to an economic success in just a decade.

An ideal location for Indian exporters and business persons to expand their business in Europe and South America

  1. What is the historical, political and economic background of the relationship between India and Portugal?

Ans: India and Portugal share a long history of 700 years of colonial rule which ended in 1961. Portuguese traders came to India and settled at various ports, eventually becoming their rulers. After 1961, there was no diplomatic and economic relationship between the two countries until 1975.

However, due to its colonial history, Portugal currently has 70,000 people of Indian decent – 7% of its total population of 10 million. Though Portugal is a small country, it is of great strategic importance in Europe; having inherently European roots and the cultural diversity of Latin America. For Indian business persons and exporters, it can be an ideal location to enter the European market as well as the South American market.

The histories of India and Portugal are closely linked. The current Prime Minister of Portugal, Mr. António Costa (born in 1961 in Portugal and a lawyer by profession), is of Indian origin. He was felicitated with the prestigious Pravasee Bhartiya Sanman award by President of India in 2017.

The former speaker of Portugal, Mr. Narana Coissoró, is also of Indian origin.

Apart from these personalities, there are quite a few notable politicians and business persons in Portugal who are of Indian origin.

  1. How strong is the Portuguese economy today?

 Ans: The mainstay of Portugal’s economy is tourism and the industries related to it. It constitutes 17% of the country’s economy. The economic crisis of 2008 had a devastating effect on Portugal’s economy and financial bailout was provided by the European Union so that the country could come out of its worst known economic setback.

Interestingly, the constructive measures implemented by the Portuguese government in the last 10 years have greatly revived Portugal’s economy, making it vibrant once again with a positive outlook.

  1. What measures has Portugal taken to revive its economy?

Ans: The Portuguese economy, bailed out by the European Union eight years ago, is currently booming. It is enjoying its highest economic growth in nearly two decades, fuelled by record tourism, an upswing in the housing market, a growing tech sector and strong exports.

Wharton finance professor Joao Gomes, a native of Lisbon, said that Portugal’s economic recovery is better understood in the context of the broader recovery across Europe, which he rated as “excellent.” Portugal has benefited from Europe’s economic recovery in a few ways: tourism, exports and increased domestic investment. These have helped reduce the unemployment rate from its peak of 17.5% in the first quarter of 2013 to 7.9% in the first quarter of 2018.

Some visible measures we see enacted include – reduction in government spending, reduction in VAT tax from 23% to 13%, giving tax exemption to foreign retirees and introducing the Golden Visa Program offering Portuguese residency to non-EU citizens, thereby providing access to the European Union market.

Rental laws have also been changed to allow landlords to renovate old buildings. The idea behind this was to create jobs within the community.

Though the Portuguese government is currently faced with huge debts, the future looks promising from several perspectives.

The country’s economic recovery has been noticed by EU and many economists around the world. The model adopted by Portugal is also being followed by other EU countries such as Spain, Greece and Ireland.

 How are the Portuguese financial markets faring in midst of all this economic turmoil?

Ans: As part of the pan European exchange since 2002, Euronext Lisbon is a stock exchange based in Lisbon, Portugal.

The Euronext Lisbon trades equities, public and private bonds, participation bonds, warrants, corporate warrants, investment trust units, and exchange traded funds.

The BVL General Index is the exchange’s official index, and includes all listed shares on the official market and settlement is T+2. Like most exchanges, it has derivatives as well. The trading hours are 8 a.m. to 4:30 p.m., Monday through Friday.

Interbolsa is Euronext’s Central Securities Depository and is a leading provider of Settlement and Custody Services.

Despite the strong economic performance and sustained reform momentum over the past few years, Portugal entered the COVID-19 crisis with undersized capital markets. These markets must now be mobilised to support a resilient, dynamic and sustainable recovery, according to a new OECD report.

The improved economic conditions in the country over the recent years have not translated into a rise in the use of capital market financing by Portuguese companies. At the end of 2019, there were only 47 companies listed on the Portuguese stock market, only a third of the number listed back in 1997.

Instead, companies heavily rely on bank financing, with very few using long-term bond markets. The picture for private capital markets is similar. In 2019, the Portuguese share of European private equity investments was less than half of its share in the GDP of the European Union.

  1. Why is real estate a very important market in Portugal?

Ans: In the year 2020, Portugal’s housing prices continued to rise strongly, amidst surging demand buoyed by low interest rates. Property prices in Portugal rose by 8.12% during the year to Q2 2020, slightly lower than the previous year’s 10.09% growth. On a quarterly basis, house prices fell slightly by 0.3% in Q2 2020.

The construction activity weakened in 2020, mainly due to the COVID-19 pandemic. In the first half of 2020, the number of licensed dwelling permits in Portugal fell by 4.1% to 11,259 units from a year earlier, after rising by 18.4% in 2019 and 43.5% in 2018, based on INE figures.

Rents and rental yields are good in Lisbon, at around 5.45%.

Due to the Golden Visa Program and renovation of old buildings, the housing and real estate market is further showing a strong growth in Portugal, mainly in Lisbon and Porto city.

This growth offers two opportunities for Indian HNIs and business persons. Those interested in exporting or expanding their business can invest in real estate in Portugal, obtain residency and then expand their business in the European mainland.

Indian real estate developers interested in entering the European real estate market can do so by undertaking small renovation projects in Portugal and then gradually increasing their presence in Portugal, and then subsequently in Europe. However, construction activities are regulated and licensed in Portugal. This may necessitate the presence of a local partner or a company who has all the required licenses and permits to undertake renovation projects or new development projects in Portugal.

  1. What are the programs under which Indian business persons and exporters can expand their business in Europe using Portugal as a base?

Ans: Under its Golden Visa Program, Portugal offers a variety of options for obtaining residency of Portugal. This residency status allows one to work, study or do business in Portugal.

Golden Residence Permit holders have access to free movement across all 26 Schengen countries and stays of up to 90 days in every 6 month period (from the date of entry) in these countries, which is a great advantage to foreign citizens who are usually subject to strict EU immigration regulations and visas when travelling to or across Europe.

This Golden Visa scheme aims to attract wealthy foreign investors, business persons and exporters as well as their families, to help re-launch the Portuguese economy. It is a great opportunity for non-EU investors to buy luxury holiday homes in renowned resorts, to carry out financial investments or to set up business ventures in Portugal.

Application for a Golden Visa can also be made from within Portugal. With extremely reduced minimum stay requirements, the Golden Visa is clearly one of the most attractive residency programs for aforementioned category of individuals in the world. It is an excellent program whereby business persons can conduct their business in the European mainland without having to stay there on a long term basis.

  1. What are the investment requirements to obtain residency of Portugal?

There are several passive or active investments options available.

One can choose to invest in one of the following investment options:

  1. Euro 500,000 in any real estate
  2. Euro 350,000 in a real estate which is 30 years and older
  • Euro 250,000 in a restoration of heritage building
  1. Euro 350,000 in a research and scientific activity
  2. Euro 1 million in financial instruments
  3. Euro 350,000 in Investment fund or Venture fund
  • No definite investment but create 10 jobs for local Portuguese persons
  • Euro 350,000 investment in a company that will create 5 jobs for a period of 3 years in the National Territory Region.

These investments are for a period of five years and the resident permit can be renewed every 2 years. This resident permit allows access to other Schengen areas of Europe for visits up to 90 days. At the end of 5 years, one can apply for permanent residency or choose to apply for citizenship. Citizenship of Portugal allows the person to live, work and do business in any Schengen country.

In each of the aforementioned investment categories, children under the age of 18 years can be included; if they are financially dependent on their parents, children up to the age of 25 years can also be included in the same application.

 How can obtaining Portuguese residency be beneficial to Indian exporters and business persons?

Ans: The main aim behind obtaining Portuguese residency is not to leave India and immigrate, but to create a bigger customer base for Indian products and services in Portugal and Europe. If you try to export goods from India, you need to go through the whole bureaucratic process (including cumbersome paperwork) and delivery of goods can take several days, weeks or months.

If you are a resident of Portugal, you can register a company in Portugal, purchase a warehouse and then distribute goods all across Europe within 2-3 days. You can receive payment in a local bank in Europe. Many exporters from China, Taiwan and Korea are doing business in Europe in this manner. If Indian business persons do not embrace this approach, they will soon be facing tough competition for exporting their goods to these countries from expat exporters. This is simply because importers in Europe will prefer local suppliers over Indian suppliers, unless their product or service is unique or unavailable locally.

  1. How can Indian SMEs do business in Portugal?

Ans: Successful Indian business persons can prepare a business plan that includes the nature of the potential business they plan to start, the type and amount of investment they are willing to make and how they can productively contribute to the Portuguese economy.

Based on this, they can apply for a resident permit at the nearest Portuguese Consulate. If the application is approved, they will be granted a 4-month visa to enter Portugal and start a business after obtaining a resident permit from Serviço de Estrangeiros e Fronteiras (SEF). This permit can be renewed every two years.

The business persons must be actively involved in the business and must not be absent from Portugal for more than 6 consecutive months or 8 interpolated months.

  1. How can Indian start-ups enter the Portuguese market and what are the opportunities?

Ans: Aligning with the EU’s policies, the Portuguese government has introduced a very vibrant and active start-up program to attract global start-ups that will use Portugal as a base to enter the European market.

Indian start-ups may present their innovative ideas to government approved incubation centers and if their ideas are accepted, the Portuguese government will allow these start-ups to apply for the necessary resident permit for a period of one year.

Once the start-up is established in Portugal, the entire ecosystem and the government’s support system will be accessible to the Indian start-up and they will be treated in par with Portuguese start-ups.

  1. Is Portugal a good destination for retirees?

Ans: Of course. Portugal has beautiful Mediterranean weather and is a favoured destination in Europe for retirees. Due to its low cost of living, high quality of life and low crime rate, it’s an ideal country to retire on the mainland of Europe.

In order to attract wealthy retirees to Europe, the government of Portugal has devised a special program. Under this program, applicants must show that they have sufficient income from investments or business operations outside of Portugal to financially support their stay in Portugal.