Sunday, November 6, 2011

RBI softens FDI rules to attract global investors

Government efforts to softens its red taps for   global investors, as Reserve Bank of India, RBI, has said that transfer of shares between Indians and non-residents will not require its permission in several key areas like financial services.

Amending the Foreign Exchange Management Regulations, the RBI said that its prior permission would not be necessary where the company, whose shares are being transferred, is engaged in any financial service.

The liberalisation would help the entire financial services sector, including the non-banking finance companies.

Besides, the RBI permission has also been done away with for transfer of shares between residents and non-residents in cases where the Foreign Investment Approval Board, FIPB, has already given its clearances and the SEBI guidelines have been adhered to. However, it was made clear that the transactions will have to comply with the SEBI regulations, FDI sectoral caps, and the pricing guidelines as specified by RBI.

Although FDI inflows during April-August have gone up by 95 per cent to 17.37 billion US dollars, the government and the Reserve Bank are keen to maintain robust foreign exchange reserves in the wake of volatility in the stock market leading to outflows by institutional investors.

The country has foreign exchange reserves of 318 billion dollars. Overseas investments by Indian companies in September were 3.46 billion dollars.

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