In the globalized financial landscape, Indian companies frequently access international capital markets to raise funds from overseas investors. Among various routes available, Depository Receipts (DRs)—such as American Depository Receipts (ADRs) and Global Depository Receipts (GDRs)—serve as a crucial bridge connecting Indian issuers with foreign investors. To maintain regulatory transparency in these cross-border transactions, the Reserve Bank of India (RBI), under the framework of the Foreign Exchange Management Act, 1999 (FEMA), has introduced several reporting requirements. One such reporting obligation is through Form DRR.

Form DRR plays a central role in ensuring that all transactions involving the issue or transfer of Depository Receipts are reported in a timely and standardized manner. It provides the RBI with vital information to monitor foreign investment inflows and maintain balance of payments data with greater precision.

1. Understanding Depository Receipts (DRs)

Before delving into the specifics of Form DRR, it is essential to understand what Depository Receipts represent. DRs are negotiable financial instruments issued by a foreign depository bank, representing ownership of a specific number of equity shares of an Indian company. These shares are held with a domestic custodian bank in India, while investors abroad trade the corresponding DRs in overseas markets.

The most common types include:

a. American Depository Receipts (ADRs) – traded on U.S. exchanges.

b. Global Depository Receipts (GDRs) – traded in multiple international markets, especially in Europe and Asia.

These instruments allow Indian companies to raise foreign capital without directly listing on foreign stock exchanges, while offering international investors a convenient, regulated mode of investment exposure to Indian equities.

2. The Regulatory Foundation under FEMA

The issuance and transfer of DRs by Indian companies fall under the purview of FEMA 1999 and its allied regulations—particularly the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019, and the Depository Receipts Scheme, 2014.

The RBI, being the principal regulator of foreign exchange transactions, mandates reporting mechanisms for all capital account transactions to ensure that inflows and outflows are accurately captured and compliant with prescribed limits. In this context, Form DRR serves as the principal reporting form for DR-related activities.

3. What is Form DRR?

Form DRR (Depository Receipts Reporting Form) is a prescribed online reporting format under FEMA for Indian companies that issue or transfer Depository Receipts to non-residents. The form is filed through the FIRMS portal (Foreign Investment Reporting and Management System) of the RBI.

Form DRR must be submitted by:

a. The Indian company that issues equity shares or other eligible securities for the creation of DRs, and/or

b. The Domestic Custodian Bank that holds the underlying shares when DRs are issued or transferred.

The form captures vital information about the DR issue, including the type of DR, number of shares underlying each receipt, amount raised, and particulars of the foreign depository involved.

4. Purpose and Significance of Form DRR

The introduction of Form DRR aims to streamline reporting and ensure transparency in the flow of foreign capital. It provides several key benefits:

a. Monitoring Capital Inflows: RBI can track how much foreign investment enters the Indian economy through DR mechanisms.

b. Ensuring Regulatory Compliance: It helps verify that the issuance or transfer of DRs complies with sectoral caps, pricing guidelines, and eligibility norms.

c. Data Accuracy for Policy Decisions: The reported data aids in macroeconomic policy formulation, particularly for balance of payments and foreign investment trends.

d. Transparency in Cross-Border Dealings: DRR ensures that both Indian issuers and foreign investors operate within a transparent and accountable framework.

5. Key Reporting Requirements

a. Reporting Timeline:
Form DRR must be filed within 30 days from the date of issue or transfer of Depository Receipts. Delayed submission may attract penalties under FEMA’s compounding provisions.

b. Mode of Submission:
The reporting is done online through the FIRMS portal, under the Single Master Form (SMF) interface.

c. Details Required in Form DRR:

1. 1. Name and Corporate Identification Number (CIN) of the Indian company.
   2. Names of the domestic custodian and foreign depository.
   3. Type and number of Depository Receipts issued/transferred.
   4. Amount raised in foreign currency and INR equivalent.
   5. Underlying security details (type, face value, ISIN, etc.).
   6. Particulars of end-use of proceeds, if applicable.

d. Certification: The form must be digitally certified by an Authorised Dealer (AD) Category-I bank before submission to the RBI.

6. The Process Flow of Form DRR Filing

a. Initiation: The Indian company or its domestic custodian initiates the report on the FIRMS portal.

b. Verification by AD Bank: The Authorised Dealer bank verifies the accuracy of information and certifies the submission.

c. Acknowledgement by RBI: Upon reviewing the submission, the RBI issues an acknowledgment or seeks clarifications if discrepancies are found.

This online, paperless system has significantly simplified earlier manual reporting processes, enhancing efficiency and compliance monitoring.

7. Penalties for Non-Compliance

Failure to file Form DRR or delay in reporting can lead to violations under Section 13 of FEMA, 1999. The RBI may impose monetary penalties or call for compounding proceedings. Moreover, repeated non-compliance may affect the company’s ability to undertake future capital account transactions or to raise capital through foreign fundraising initiatives.

8. Practical Insights and Compliance Tips

a. Maintain Documentation: Keep a proper trail of all agreements between the Indian company, custodian, and foreign depository.

b. Synchronize with AD Bank: Timely coordination with the authorised dealer bank ensures seamless verification.

c. Monitor Regulatory Updates: RBI frequently revises reporting formats or timelines. Staying updated helps prevent inadvertent defaults.

d. Use the FIRMS Dashboard: The portal allows tracking of submission status, reducing manual follow-up.

e. Engage Professionals: For large or complex DR issues, engaging FEMA consultants or compliance officers can help avoid reporting errors.

9. Broader Implications of DRR Reporting

Form DRR extends beyond mere procedural compliance—it underscores India’s broader commitment to maintaining a robust and transparent foreign investment environment. As Indian corporations increasingly tap global markets, maintaining regulatory discipline through such reporting enhances investor confidence and ensures macroeconomic stability.

Furthermore, accurate DRR reporting helps the RBI and government agencies assess the quantum of foreign participation in Indian equity markets, a crucial input in shaping external sector policies.

Conclusion

In essence, Form DRR under FEMA acts as a compliance gateway for cross-border capital raising through Depository Receipts. While it may appear as a routine reporting obligation, its significance extends far beyond paperwork—it is an essential mechanism for transparency, accountability, and regulatory oversight in India’s foreign investment ecosystem.

For companies aspiring to tap global capital markets, understanding and timely submission of Form DRR not only fulfils legal obligations but also reflects sound corporate governance. In the evolving era of global finance, compliance is not just about adhering to rules—it is about building trust with regulators, investors, and markets alike.

For any clarifications or queries, please feel free to reach out to us at admin@fintracadvisors.com

Disclaimer

The content published on this blog is for informational purposes only. The opinions expressed here are solely those of the respective authors and do not necessarily reflect the views of Fintrac Advisors. No warranties are made regarding this information’s completeness, reliability, or accuracy. Any actions taken based on the information presented in this blog are solely at the reader’s risk, and we will not be liable for any losses or damages resulting from its use. It is recommended that professional expertise be sought for such matters. External links on this blog may direct users to third-party sites beyond our control. We do not take responsibility for their nature, content, or availability.