Category Archives: financial laws

Foreign Investment in other financial services sector

PIB press release dated 10th August, 2016

The Union Cabinet chaired by the Prime Minister Shri Narendra Modi has given its approval to amend regulation for foreign investment in the Non- Banking Finance Companies (NBFCs).

The amendment in the existing Foreign Exchange Management (Transfer or Issue of Security by the Person Resident Outside India) regulations on Non- Banking Finance Companies (NBFCs) will enable inflow of foreign investment in “Other Financial Services” on automatic route provided such services are regulated by any financial sector regulators (RBI, SEBI, PFRDA etc.) / Government Agencies. Foreign investment in “Other Financial Services”, which are not regulated by any regulators / Government Agency, can be made on approval route.

Further, minimum capitalisation norms as mandated under FDI policy have been eliminated as most of the regulators have already fixed minimum capitalisation norms. This will induce FDI and spurt economic activities. It will cover whole India and is not limited to any State/Districts.

Background

In the Budget 2016-17 Speech, the Hon’ble Finance Minister had announced that “FDI will be allowed beyond the 18 specified NBFC activities in the automatic route in other activities which are regulated by financial sector regulators”. The present regulations on “Non-Banking Finance Companies” stipulates that FDI would be allowed on automatic route for only 18 specified NBFC activities after fulfilling prescribed minimum capitalisation norms mentioned therein. In the proposed regulations, FDI is allowed on automatic route for all “Other Financial Services” provided such services are regulated by any regulators (RBI, SEBI, PFRDA etc.) / Government Agencies. Further, minimum capitalisation norms as mandated under FDI policy have been eliminated as most of the regulators have already fixed minimum capitalisation norms.

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Filed under banking laws, company secretary, FEMA, financial laws, NBFC compliances

Investment in Credit Information Companies

RBI notification dated 19th May, 2016

In exercise of the powers conferred by sub-section (1) of Section 11 of Credit Information Companies (Regulation) Act, 2005, and in supersession of its direction on Investment in Credit Information Companies (CICs) dated November 29, 2013, Reserve Bank of India, being satisfied that it is necessary and expedient in the public interest to do so, hereby directs that investments directly or indirectly by any person, whether resident or otherwise, in a CIC, shall not exceed ten percent of the equity capital of the investee company.

2. Notwithstanding the above, the Reserve Bank may consider allowing higher FDI limits as under to entities which have an established track record of running a Credit Information Bureau in a well regulated environment:

  1. up to 49% if their ownership is not well diversified (i.e., one or more shareholders each hold more than 10% of voting rights in the company)
  2. up to 100% if their ownership is well diversified

    or

    If their ownership is not well diversified, at least 50% of the directors of the investee CIC in India are Indian nationals/ Non-Resident Indians/ Persons of Indian Origin subject to the condition that one third of the directors are Indian nationals resident in India.

  3. The investor company should preferably be a listed company on a recognised stock exchange.

3. FII/FPI investment would be permitted subject to the conditions that:

  1. A single entity should directly or indirectly hold below 10% equity;
  2. Any acquisition in excess of 1% will have to be reported to RBI as a mandatory requirement;
  3. FIIs/FPIs investing in CICs shall not seek a representation on the Board of Directors based upon their shareholding.

4. In case the investor in a Credit Information Company in India is a wholly owned subsidiary (directly or indirectly) of an investment holding company, the conditions as at (2) and (3) above will be applied to the operating group company that is engaged in credit information business and has undertaken to provide technical know-how to the Credit Information Company in India.

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Filed under financial laws