Reserve Bank Of India
A.P. (DIR Series) Circular No.28
August 19, 2013
To
All Banks Authorised to Deal in Foreign Exchange
Madam/Sir,
Foreign Investments in Asset Reconstruction Companies (ARC)
Attention of Authorized Dealers is invited to the Foreign Exchange Management
(Transfer or Issue of Security by a Person Resident outside India) Regulations,
2000 notified by the Reserve Bank of India vide
Notification No.20 dated 3rd May
2000 as amended from time to time and
A.P.(DIR Series) Circular No.16 dated
November 11, 2005.
- In terms of the aforesaid circular :
- Foreign Direct Investment (FDI) upto 49% in the equity capital of Asset
Reconstruction Companies (ARCs) was permitted subject to certain conditions.
However, investment by Foreign Institutional Investors (FIIs) in the equity
capital of ARCs was not permitted; and
- general permission was granted to Foreign Institutional Investors (FIIs) to
invest in Security Receipts (SRs) upto 49 per cent of each tranche of scheme of
Security Receipts subject to condition that investment of a single FII in each
tranche of scheme of SRs shall not exceed 10 per cent of the issue.
- A review of the policy was undertaken and it has been decided as under:
The ceiling for FDI in ARCs has been increased from 49% to 74% subject to the
condition that no sponsor may hold more than 50% of the shareholding in an ARC
either by way of FDI or by routing through an FII. The foreign investment in
ARCs would need to comply with the FDI policy in terms of entry route
conditionality and sectoral caps.
The foreign investment limit of 74% in ARC would be a combined limit of FDI and
FII. Hence, the prohibition on investment by FII in ARCs will be removed. The
total shareholding of an individual FII shall not exceed 10% of the total
paid-up capital.
The limit of FII investment in SRs may be enhanced from 49% to 74% of the paid
up value of each tranche of scheme of Security Receipts issued by the Asset
Reconstruction Companies. Further, the individual limit of 10% for investment of
a single FII in each tranche of SRs issued by ARCs may be dispensed with. Such
investment should be within the FII limit on corporate bonds prescribed from
time to time, and sectoral caps under the extant FDI Regulations should be
complied with.
- A copy of Press Release dated December 21, 2012 issued in this regard by
Department of Financial Services, Ministry of Finance Government of India is as
per Annex.
- Reserve Bank of India has since amended the Regulations and notified vide
Notification No. FEMA.254/2013-RB dated January 07, 2013 vide G.S.R.No.344(E)
dated May 29, 2013.
- Authorised Dealer banks may bring the contents of this circular to the notice
of their constituents and customers concerned.
- The directions contained in this circular have been issued under sections
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,
(Rudra Narayan Kar)
Chief General Manager-in-Charge
RBI/2013-14/191