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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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