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
Non-Banking Finance Companies (NBFC) sector of India under the
consolidated FDI policy of India 2012.
FDI in Non-Banking Finance Companies
(NBFC) is
allowed up to 100% under the automatic route in only the following
activities:
(i) Merchant Banking
(ii) Under Writing
(iii) Portfolio Management Services
(iv) Investment Advisory Services
(v) Financial Consultancy
(vi) Stock Broking
(vii) Asset Management
(viii) Venture Capital
(ix) Custodian Services
(x) Factoring
(xi) Credit Rating Agencies
(xii) Leasing & Finance
(xiii) Housing Finance
(xiv) Forex Broking
(xv) Credit Card Business
(xvi) Money Changing Business
(xvii) Micro Credit
(xviii) Rural Credit
The other conditions in this regard are:
(1) Investment would be subject to the following minimum capitalisation norms:
(i) US $0.5 million for foreign capital up to 51% to be brought upfront
(ii) US $ 5 million for foreign capital
more than
51% and up to 75% to be brought upfront
(iii) US $ 50 million for foreign capital more than 75% out of which US$ 7.5 million to be brought upfront and the balance in 24 months.
(iv) 100% foreign owned NBFCs with a
minimum
capitalisation of US$ 50 million can set up step down subsidiaries
for specific NBFC activities, without any restriction on the number
of operating subsidiaries and without bringing in additional capital.
The minimum capitalization condition shall not apply to downstream
subsidiaries.
(v) Joint Venture operating NBFCs that
have 75% or
less than 75% foreign investment can also set up subsidiaries for
undertaking other NBFC activities, subject to the subsidiaries also
complying with the applicable minimum capitalisation norm mentioned
in (i), (ii) and (iii) above and (vi) below.
(vi) Non- Fund based activities : US $0.5 million to be brought upfront for all permitted non-fund based NBFCs irrespective of the level of foreign investment subject to the following condition:
It would not be permissible for such a
company to
set up any subsidiary for any other activity, nor it can participate
in any equity of an NBFC holding/operating company.
The following activities would be
classified as
Non-Fund Based activities:
(a) Investment Advisory Services
(b) Financial Consultancy
(c) Forex Broking
(d) Money Changing Business
(e) Credit Rating Agencies
(vii) This will be subject to compliance with the guidelines of RBI.
(i) Credit Card business includes
issuance, sales,
marketing and design of various payment products such as credit
cards, charge cards, debit cards, stored value cards, smart card,
value added cards etc.
(ii) Leasing & Finance covers only financial leases and not operating leases.
(2) The NBFC will have to comply with
the guidelines
of the relevant regulator/ s, as applicable.
