Rules eased for foreign investors

Updated on Sep 30, 2004 07:48 PM IST

Besides easing fresh equity rules, Govt further liberalised norms for conversion of foreign loans and preference shares into equity.

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PTI | ByPress Trust of India, New Delhi

Government has eased rules for issue of fresh equity to foreign investors and further liberalised norms for conversion of foreign loans and preference shares into equity.

Conversion of external commercial borrowings (ECB)/loan into equity and increase in foreign equity participation by fresh issue of shares as well as conversion of preference shares into equity capital shall be given automatic clearance, subject to sectoral caps.

The move is aimed at boosting inflow of foreign direct investment. "In order to make the environment in India more attractive for foreign investors, Government has decided to simplify the procedure" by placing the procedures under "the General Permission route (RBI route) instead of existing Government approval route (FIPB route) for speedy and streamlined investment approvals," an official release said.

Simply put, corporates would no longer need the approval of the Foreign Investment Promotion Board (FIPB) but get the proposals vetted by the Reserve Bank of India.

"Transfer of shares from resident to non-resident (including transfer of subscribers' share to non-residents) other than in financial services sector provided the investment is covered under automatic route, does not attract the provisions of SEBI's (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, falls within the sectoral cap and also complies with prescribed pricing guidelines," the release said.

The release said conversion of ECB/loan into equity provided the activity of the company is covered under automatic route, the foreign equity after such conversion falls within the sectoral cap and also complies with prescribed pricing guidelines, will no longer need to go to FIPB.

"Cases of increase in foreign equity participation by fresh issue of shares as well as conversion of preference shares into equity capital provided such increase falls within the sectoral cap in the relevant sectors, are within the automatic route and also complies with prescribed pricing guidelines" have also been taken out of the ambit of FIPB, it said.

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