Source: Business Standard, Aug 11, 2016
New Delhi: Foreign investment will now be able to flow into financial services such as commodity broking and other such areas not covered in the 18 areas specified for non-banking financial companies (NBFCs).
The Cabinet on Wednesday approved amendments to the Foreign Exchange Management (Transfer or Issue of Security by the Person Resident Outside India) regulations on NBFCs to this effect. A proposal in this regard was made in the Budget for 2016-17 by Finance Minister Arun Jaitley.
As much as 100 per cent foreign investment can come into these services under the automatic route, if these services are regulated by financial sector regulators like the Reserve Bank of India, the Securities and Exchange Board of India, the Pension Fund Regulatory and Development Authority and the Insurance Regulatory and Development Authority.
Besides commodity broking, foreign investment would also be allowed to come into asset finance companies, depository participants and infrastructure debt funds, sources said. Minimum capital requirements would be the same as fixed by the regulators.
At present, 18 areas under NBFCs are allowed to attract 100 per cent foreign investment. These include merchant banking, underwriting, portfolio management services, investment advisory services, financial consultancy, stock broking and asset management.
Foreign investment can still come in to the activities not regulated by financial sector regulators, but only through the approved route. This means via the Foreign Investment Promotion Board or the Cabinet Committee on Economic Affairs.
“This will induce foreign investment and spurt economic activities. It will cover whole India and is not limited to any states or districts,” the government said in a statement.
The move is continuation of liberalisation of the foreign investment regime by the government. In June this year, the government had announced liberalisation in eight sectors, including defence and civil aviation.
In 2015-16, foreign direct investment in India grew by 29 per cent year-on-year to $40 billion.