|
INDIA
BUSINESS WORLD -
NOVEMBER 2005
THE MONTH THAT WAS
FDI IN LISTED NBFCS SET TO GET AUTO ROUTE
Foreign investment
regime in the non-banking segments of the financial sector
is to be liberalised further. FDI in existing non-banking
finance companies and other financial services, like insurance,
will not require fresh government approval as these companies
already meet all the relevant norms at the time of incorporation.
Subsequently, a foreign investor can automatically buy shares
of these companies through the secondary market. Transfer
of shares between residents and non-residents will be done
automatically.
A Cabinet note
moved by the government says: "There should be no need
to continue with the requirement of prior government approval
for acquisition of shares in an Indian company in the financial
services sector" because the initial investment for these
entities comes under the automatic route. It goes on to say
that in such circumstances, "acquisition of shares of
such listed Indian companies could also be placed under the
automatic route, subject to Sebi guidelines and regulations".
Currently, foreign
investment in a listed NBFC has to be approved by RBI. Henceforth,
these would be subjected only to the normal Sebi regulations
regarding acquisitions. This would also apply to insurance
companies which may enlist in the future. For example, a foreign
investor who buys shares in such a company through the secondary
market will not require government approval.
This has been okayed by RBI, with the rider that such facility
cannot be extended to the banking sector. The relaxation is
significant as this would facilitate smooth transfer of shares
to foreign investors within the given FDI cap, provided the
companies enlist.
|
