FDI Pricing Guidelines Revised for Share Transfers
Current · Source: Reserve Bank of India · RBI/2009-10/445 · issued 04 May 2010 · ~2 min read
Quick answerRBI revised pricing guidelines for FDI share transfers, effective immediately. For listed shares, transfer price from resident to non-resident must not be less than preferential allotment price; for unlisted shares, fair valuation by a SEBI registered Category-I Merchant Banker or a Chartered Accountant as per discounted free cash flow method is required. All sectors covered.
The rule, in the simplest words
When a resident (someone living in India) sells listed shares (shares traded on a stock exchange) to a non-resident (someone living outside India), the price must be at least as high as the preferential allotment price (a special price set for big investors).
For unlisted shares (shares not traded on a stock exchange), a SEBI registered Category-I Merchant Banker (a special finance expert approved by the market regulator) or a Chartered Accountant (a certified accountant) must calculate a fair price using the discounted free cash flow method (a way to value a company based on its future cash).
These new pricing rules apply to all sectors (every type of business), including financial services (banks, insurance, etc.).
Banks must check that every share transfer from a resident to a non-resident follows these new pricing rules right away.
How it plays out — a real example
Ravi, a forex & trade-finance officer in Indore, reviews a client's request to transfer unlisted shares of a local textile company to a foreign investor. He asks the client to get a fair valuation certificate from a SEBI registered Category-I Merchant Banker using the discounted free cash flow method, ensuring the price is correct before approving the transfer.
What changed
The pricing guidelines for transfer of equity instruments from residents to non-residents and vice versa have been revised. For listed shares, the minimum transfer price is now linked to the preferential allotment price instead of the earlier 'ruling market price'. For unlisted shares, fair valuation by a SEBI registered Category-I Merchant Banker or a Chartered Accountant as per discounted free cash flow method is required. The changes apply to all sectors, including financial services.
What it means for you
Banks must ensure that all FDI-related share transfers comply with the revised pricing benchmarks, which align transfer pricing with preferential allotment rules for listed shares. This reduces ambiguity and standardizes valuation across sectors. Lenders facilitating such transfers need to update their internal compliance checklists and advise clients accordingly.
What you must do
Update internal procedures for verifying share transfer pricing under FDI to reflect the new benchmarks.
Advise AD Category-I bank customers and constituents about the revised pricing guidelines effective immediately.
Ensure that for listed shares, the transfer price from resident to non-resident is not less than the preferential allotment price.
For unlisted shares, require fair valuation certification by a SEBI registered Category-I Merchant Banker or a Chartered Accountant as per discounted free cash flow method.
Review all pending share transfer applications to confirm compliance with the revised circular.
Who it affects
All Category-I Authorised Dealer Banks, Indian companies issuing or transferring equity instruments to non-residents, Foreign investors (FIIs, NRIs, foreign nationals, incorporated non-resident entities), Chartered Accountants and SEBI registered Category-I Merchant Bankers involved in share valuation
❓ Common questions
What is the key change in pricing for listed shares transferred from a resident to a non-resident?
The minimum price for such transfers must now be at least the price applicable for a preferential allotment of shares, replacing the earlier 'ruling market price' benchmark.
Does this circular apply to transfers in the financial services sector?
Yes, the revised pricing guidelines apply to all sectors, including financial services (banks, NBFCs, insurance, etc.), as per the Annex-I of the circular.
When do these revised guidelines become effective?
The directions are operative with immediate effect from May 4, 2010, the date of the circular.
📜 Read the original circular — full text as issued by RBI
RBI/2009-10/445
A. P. (DIR Series) Circular No.49
May 04, 2010
To
All Category-I Authorised Dealer Banks
Madam / Sir,
Foreign Direct Investment (FDI) in India -
Transfer of Shares / Preference Shares / Convertible Debentures
by way of Sale - Revised pricing guidelines
Attention of the Authorised Dealer Category – I (AD Category - I) banks is invited to the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000, notified vide Notification No. FEMA 20/2000-RB dated May 3, 2000 , as amended from time to time.
2. In terms of Schedule 1 of the Notification, an Indian company may issue equity shares, compulsorily convertible preference shares and compulsorily convertible debentures (equity instruments) to a person resident outside India under the FDI policy, subject to inter alia, compliance with the pricing guidelines. Further, in terms of the A. P. (DIR Series) Circular No.16 dated October 4, 2004 and A. P. (DIR Series) Circular No. 63 dated April 22, 2009, general permission is available for transfer of equity instruments, by way of sale, from residents to non-residents (including transfer of subscriber's shares) of an Indian company in sectors other than financial services sector (i.e. Banks, NBFCs, Insurance, Asset Reconstruction Companies, Infrastructure companies in securities market namely, Stock Exchanges, Depositories and Clearing Corporations, Credit Information Companies and Commodity Exchanges) from residents to non-residents and vice versa.
3. The extant guidelines have been reviewed in consultation with the Government of India and accordingly the pricing guidelines in respect of issue of shares including preferential allotment have been revised. A copy of the Notification No. FEMA 205/2010-RB dated April 7, 2010 , notified vide G.S.R. No.341 (E) dated April 21, 2010, amending the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000 ( Notification No. FEMA 20/2000-RB dated May 3, 2000 ) issued in this regard is enclosed (Annex-II).
4. Further, the pricing guidelines for transfer of equity instruments from a resident to a non-resident and vice versa issued vide A. P. (DIR Series) Circular No.16 dated October 4, 2004 have also been reviewed and the paragraph Nos. 2.2 and 2.3 of the Annex to the circular have been accordingly amended. The revised instructions applicable to transfer of shares of an Indian company in all sectors are given in the Annex-I . All the other instructions of A. P. (DIR Series) Circular No.16 dated October 4, 2004 shall remain unchanged.
5. These directions will become operative with immediate effect.
6. AD Category – I banks may bring the contents of this circular to the notice of their constituents and customers concerned.
7. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and is without prejudice to permissions / approvals, if any, required under any other law.
Yours faithfully,
(Salim Gangadharan)
Chief General Manager-in-Charge
Annex-I
[Annex to A. P. (DIR Series) Circular No. 49
dated May 04, 2010]
Paragraph No. [cf. A.P.(DIR Series) Circular No. 16 dated October 4, 2004]
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2009-10/445 · issued 04 May 2010. The plain-English explanation above is BankPulse’s own independent summary.
Review all pending share transfer applications to confirm compliance with the revised circular.
📜 Compliance
Update internal procedures for verifying share transfer pricing under FDI to reflect the new benchmarks.
Advise AD Category-I bank customers and constituents about the revised pricing guidelines effective immediately.
Ensure that for listed shares, the transfer price from resident to non-resident is not less than the preferential allotment price.
For unlisted shares, require fair valuation certification by a SEBI registered Category-I Merchant Banker or a Chartered Accountant as per discounted free cash flow method.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template
Example: if you are a Compliance officer at a bank this circular applies to (All Category-I Authorised Dealer Banks, Indian companies issuing or transferring equity instruments to non-residents, Foreign investors (FIIs, NRIs, foreign nationals, incorporated non-resident entities), Chartered Accountants and SEBI registered Category-I Merchant Bankers involved in share valuation), your first concrete step on “FDI Pricing Guidelines Revised for Share Transfers” is: “Update internal procedures for verifying share transfer pricing under FDI to reflect the new benchmarks.” (RBI issued this 04 May 2010).
Circular: RBI/2009-10/445 -- FDI Pricing Guidelines Revised for Share Transfers
Issued: 04 May 2010
Action required: Update internal procedures for verifying share transfer pricing under FDI to reflect the new benchmarks.
Action required: Advise AD Category-I bank customers and constituents about the revised pricing guidelines effective immediately.
Action required: Ensure that for listed shares, the transfer price from resident to non-resident is not less than the preferential allotment price.
Action required: For unlisted shares, require fair valuation certification by a SEBI registered Category-I Merchant Banker or a Chartered Accountant as per discounted free cash flow method.
Action required: Review all pending share transfer applications to confirm compliance with the revised circular.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.
💬 Banker Discussion
Discuss this circular with fellow bankers — reply, upvote what helps, report what doesn’t belong. Be professional; no client data. Views are the commenter’s own, not BankPulse’s.
BankPulse Compliance Evidence Pack — generated 03 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=5647&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
Help us keep this accurate
Found an inaccuracy or have an improvement? Tell us. Every report is reviewed by our team before any change is made — nothing goes live unverified.
Public beta — plain-English informational summaries. Always verify against the official RBI source (circular number cited on every page) before making compliance, credit, treasury, audit, or operational decisions. · Join our WhatsApp channel ↗
BANKPULSE · FREE DAILY BRIEF
Get RBI updates for your role
Every important RBI update, decoded in plain English — for your career, exams & financial awareness.
We collect only your email, name and role, used solely to send your brief — never sold or shared. Withdraw anytime via the unsubscribe link in any email. Independent platform, not affiliated with the RBI. Information, not legal advice.
REPORT AN ERROR · BETA
Spotted an error? Earn 500 BankPulse Credits
Help us stay accurate. If your correction is verified true and approved by our founder, you earn 500 BankPulse Credits — redeemable when the platform monetises.
Reviewed by a human before any credit is awarded. We never change the site from crowd input without verification.
WANT A NEW FEATURE · BETA
What would make BankPulse more useful for you?
Tell us what to build next — a tool, a data view, a role page, anything. We read every suggestion.
Thank you — your ideas directly shape what we build.