The Reserve Bank of India on Thursday permitted 100 percent foreign direct investment in 'Other Financial Services' carried out by NBFCs, a move which will help attract foreign capital into the country.
"On a review, in consultation with the Government of India, it has been decided to allow foreign investment up to 100 per cent under the automatic route in Other Financial Services,” RBI said in a notification.
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.RBI Notification
Such foreign investment would be subject to conditionalities, including minimum capitalisation norms, as specified by the concerned regulator or government agency, it said. The notification, however, did not specify the sectors which have been opened up for automatic route.
The present regulations on non-banking finance companies (NBFCs) stipulate that FDI would be allowed on automatic route for only 18 specified NBFC activities after fulfilling prescribed minimum capitalisation norms mentioned therein.
Other salient features of the revised regulatory framework include downstream investment by any entity engaged in ‘Other Financial Services' and will be subject to extant sectoral regulations.
In the Budget 2016-17 speech, Finance Minister Arun Jaitley had announced about this liberalisation. Currently, 100 percent FDI through automatic route is permitted in 18 NBFC activities including merchant banking, under writing, portfolio management services, financial consultancy and stock broking.
In 2015-16, foreign direct investment in India grew by 29 percent year-on-year to $40 billion.
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