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FDI Pricing: Shares at Face Value via MoA Subscription

Current · Source: Reserve Bank of India · RBI/2012-13/223 · issued 26 Sep 2012 · ~1 min read
Quick answerRBI now allows non-residents (including NRIs) to subscribe to an Indian company's Memorandum of Association at face value, provided they are eligible under the FDI scheme. This simplifies pricing for initial share allotment to foreign investors.
The rule, in the simplest words
How it plays out — a real example

Rahul, a forex & trade-finance officer in Indore, helps a foreign investor, Mr. Lee, subscribe to an Indian company's Memorandum of Association at face value. Rahul verifies Mr. Lee's FDI eligibility and Companies Act compliance before processing the share allotment. With the new RBI rule, Rahul can now process the share allotment at face value, reducing valuation disputes and making it easier for Mr. Lee to invest in the Indian company.

What changed

Previously, pricing for shares allotted to non-residents under FDI was governed by general issue price rules. Now, for subscription to Memorandum of Association, the issue price can be at face value, subject to compliance with the Companies Act and FDI eligibility.

What it means for you

Banks can process share allotments to foreign investors at face value when they subscribe to the MoA, reducing valuation disputes. This eases early-stage foreign investment in Indian companies, but banks must verify FDI eligibility and Companies Act compliance.

What you must do

Who it affects

AD Category-I banks, Indian companies receiving FDI via MoA subscription, Non-resident investors (including NRIs)

❓ Common questions

Can any non-resident invest at face value under this circular?

Only those eligible under the FDI scheme can invest at face value via MoA subscription. NRIs are included if they meet FDI eligibility criteria.

Does this apply to subsequent share allotments?

No, this circular specifically covers initial subscription to the Memorandum of Association. Subsequent allotments follow standard FDI pricing guidelines.

📜 Read the original circular — full text as issued by RBI
RBI/2012-13/223 A.P. (DIR Series) Circular No. 36 September 26, 2012 To All Category - I Authorised Dealer banks Madam / Sir, Foreign Direct Investment (FDI) in India - Allotment of Shares to person resident outside India under Memorandum of Association (MoA) of an Indian company - Pricing guidelines Attention of Authorised Dealers 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 (hereinafter referred to as Notification No. FEMA 20), as amended from time to time. 2. In terms of sub-regulation (1) of Regulation 5 of the Notification ibid, a person resident outside India or an entity incorporated outside India may purchase shares or convertible debentures of an Indian company under Foreign Direct Investment Scheme, subject to compliance with the issue price specified in para 5 of Schedule 1 of the Notification ibid. 3. It has been decided that in cases, where non-residents (including NRIs) make investment in an Indian company in compliance with the provisions of the Companies Act, 1956, by way of subscription to Memorandum of Association, such investments may be made at face value subject to their eligibility to invest under the FDI scheme. 4. AD Category - I banks may bring the contents of the circular to the notice of their concerned constituents and customers. 5. 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 are without prejudice to permissions / approvals, if any, required under any other law. Yours faithfully, (Rudra Narayan Kar) Chief General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2012-13/223 · issued 26 Sep 2012. The plain-English explanation above is BankPulse’s own independent summary.
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Worked example & action-note template

Example: if you are a Compliance officer at a bank this circular applies to (AD Category-I banks, Indian companies receiving FDI via MoA subscription, Non-resident investors (including NRIs)), your first concrete step on “FDI Pricing: Shares at Face Value via MoA Subscription” is: “Update internal FDI processing guidelines to allow face-value pricing for MoA subscriptions.” (RBI issued this 26 Sep 2012).

  1. Circular: RBI/2012-13/223 -- FDI Pricing: Shares at Face Value via MoA Subscription
  2. Issued: 26 Sep 2012
  3. Action required: Update internal FDI processing guidelines to allow face-value pricing for MoA subscriptions.
  4. Action required: Verify non-resident investor eligibility under the FDI scheme before processing such allotments.
  5. Action required: Ensure compliance with Companies Act, 1956 provisions for MoA subscriptions.
  6. Action required: Advise customers on the new pricing option for initial share allotments.
  7. Owner: ____________ Target date: ____________
  8. Board/committee approval needed? Y / N
  9. 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.

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Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=7590&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.
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