This is in continuance of our series on
Consolidated
FDI Policy of India 2012 by DIPP. In this
article
Perry4Law
and Perry4Law
Techno Legal Base (PTLB) would discuss the FDI
in asset
reconstruction companies of India under the consolidated FDI policy
of India 2012.
Foreign investment in other financial
services,
other than those discussed in the present and subsequent articles
would require prior approval of the Government. For the purposes of
FDI, Asset Reconstruction Company (ARC) means a company registered
with the Reserve Bank of India (RBI) under Section 3 of the
Securitisation and Reconstruction of Financial Assets and Enforcement
of Security Interest Act, 2002 (SARFAESI Act).
FDI in ARC is allowed up to 49% of
paid-up capital
of ARC through government approval route.
(i) Persons resident outside India,
other than
Foreign Institutional Investors (FIIs), can invest in the capital of
Asset Reconstruction Companies (ARCs) registered with Reserve Bank
only under the Government Route. Such investments have to be strictly
in the nature of FDI. Investments by FIIs are not permitted in the
equity capital of ARCs.
(ii) However, FIIs registered with SEBI
can invest
in the Security Receipts (SRs) issued by ARCs registered with Reserve
Bank. FIIs can invest up to 49 per cent of each tranche of scheme of
SRs, subject to the condition that investment by a single FII in each
tranche of SRs shall not exceed 10 per cent of the issue.
(iii) Any individual investment of more
than 10%
would be subject to provisions of section 3(3) (f) of Securitization
and Reconstruction of Financial Assets and Enforcement of Security
Interest Act, 2002.
