The Reserve Bank of India is set to relax the norms for issuance of employee stock options by foreign companies to their employees in India.
The proposed relaxation may allow a foreign company to issue Esops even if it has an indirect holding of 51 percent in an Indian subsidiary, according to sources close to the development.
At present, only those foreign companies which directly hold at least 51 percent stake in their Indian ventures can issue Esops.
Foreign companies may also be allowed to buy back their shares if an employee does not subscribe to it. Employees can buy stock options only if they continue in their jobs for three years at a stretch. But, if an employee leaves a job within three years, the shares are returned to a trust formed by the company in India.
Thereafter, the company has to take the RBI's permission to buy back the shares from the trust. Under the proposed norms, a company may not be required to take RBI permission to buy back Esops that get transferred to the trust. The company will only have to inform the RBI of such transfers as part of a reporting formality.
The RBI has been continuously relaxing the norms for overseas inward and outward investment norms as part of current account liberalisation. It has also formed a committee to chalk out a road map for capital account convertibility.
Recently the central bank eased the norms for Indian companies to divest their investments in overseas ventures.
Corporations now are not needed to take the permission of the RBI for such divestment if joint ventures or wholly owned subsidiaries are listed in overseas stock exchanges.
Earlier, the government and the RBI had relaxed the norms for acquisition of foreign securities by resident individuals in Esop schemes related to American depository receipts and global depository receipts.
Under the relaxed norms, banks can make remittances up to $50,000 or its equivalent in a block of five years without the approval of the RBI for purchase of foreign securities under the ADR\GDR-linked Esop scheme.
