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April 19, 2001
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Automatic route opens for FDI in NBFCs

In a major liberalisation of the FDI regime for the non-banking finance companies, the government on Thursday announced automatic route for the foreign direct investment in the NBFC sector.

However, the FDI in NBFCs will be governed by the guidelines of the Reserve Bank of India, an official release said.

Further liberalising FDI guidelines for the NBFCs, the government has allowed overseas investors to set up100 per cent operating subsidiaries without the condition to divest 25 per cent equity to Indian entities.

However, the freedom has been given subject to a minimum FDI inflow of 50 million dollar without any restriction on the number of operating subsidiaries.

The government has also allowed the joint venture operating NBFCs, with 75 per cent or less foreign investment, to set up subsidiaries subject to minimum upfront capital inflow ranging from $500,000 to $5million.

The official statement said that the requirements regarding the quantum of capital inflows would continue. Under the existing norms, if the FDI is less than 51 per cent, an upfront investment should be $500,000. In case the FDI is more than 51 per cent, the requirement for upfront inflows is $5 million. For 75 per cent to 100 per cent FDI, the minimum inflows would be $50 million of which $7.5 million would need to be brought in upfront and the balance in 24 months.

Except a few strategically important areas, the government has already brought in the automatic route for many sectors.


Monetary & Credit Policy 2001-2002 (First Half)


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