RBI/2016-17/90
A.P. (DIR Series) Circular No. 8
October
20, 2016
To
All Category - I Authorised Dealer Banks
Madam/Sir,
Foreign
investment in Other Financial Services
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, as amended from time to time
(Principal Regulations).
2. At present, paragraph F.8 of
Annex B to Schedule 1 of the Principal Regulations permits foreign investment
up to 100%, under the automatic route, in Non-Banking Finance Companies
(NBFCs) engaged in the 18 activities listed therein. Such investment is
subject to the conditions, including minimum capitalisation norms.
3. On a review, in consultation
with the Government of India, it has been decided to allow foreign
investment up to 100% under the automatic route in ‘Other Financial
Services’. Other Financial Services will include activities which are
regulated by any financial sector regulator viz. Reserve Bank of India,
Securities and Exchange Board of India, Insurance Regulatory and
Development Authority, Pension Fund Regulatory and Development Authority,
National Housing Bank or any other financial sector regulator as may be
notified by the Government of India in this regard. Such foreign investment
shall be subject to conditionalities, including minimum capitalisation
norms, as specified by the concerned Regulator/ Government Agency.
4. Other salient features of the
revised regulatory framework are as under:
a) In financial services
activities which are not regulated or partly regulated by any financial
sector regulator or where there is lack of clarity regarding regulatory
oversight, foreign investment will be allowed up to 100% under the
Government approval route.
b) Foreign investment in an
activity which is specifically regulated by an Act, will be restricted to
foreign investment levels/limits, if any, specified in that Act.
c) Downstream investment by any
entity engaged in ‘Other Financial Services” will be subject to extant
sectoral regulations and provisions of Principal Regulations.
5. AD Category – I banks may
bring the contents of this circular to the notice of their constituents and
customers concerned.
6. Reserve Bank has since
amended the Principal Regulations accordingly through the Foreign Exchange
Management (Transfer or Issue of Security by a Person Resident outside
India) (Thirteenth Amendment) Regulations, 2016 which have been notified
through Notification No. FEMA 375/2016-RB
dated September 9, 2016 vide G.S.R. No.879(E) dated September
9, 2016.
7. The directions contained in
this circular have been issued under section 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,
(Shekhar
Bhatnagar)
Chief General Manager-in-Charge
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