INDIA: Publication of India FDI Guidelines by Reserve Bank of India

Monday July 8 2013

The Federal Reserve Bank of India has published guidelines relating to the publication of India FDI guidelines by Reserve Bank of India which outlines the calculation of total foreign investment in Indian companies, transfer of ownership and control of Indian companies and downstream investment by Indian companies. Press note 2 and 3 of the Department of Industrial Policy and Promotion (DIPP), which has been pending approval by RBI for the last four years, will be used to ensure that foreign direct investments comply with FDI ceilings and other norms.

The Guidelines define the terms “owned” and “controlled” for the purpose of calculating total foreign investment in Indian companies in sectors with foreign investment caps. A company “owned by resident Indian citizens” is an Indian company if more than 50% of the capital in it is beneficially owned by resident Indian citizens and/or Indian companies who are ultimately owned and controlled by resident Indian citizens.

A company shall be considered “controlled” by resident Indian citizens if the resident Indian citizens and Indian companies, which are owned and controlled by resident Indian citizens, have the power to appoint a majority of its directors in that company.

Where investments have been made between 13 February 2009 and the date of publication of the guidelines, companies are required to disclose, within 3 months, an issue of shares or downstream investment that is not in conformity with the new regulatory framework. The Reserve Bank will also treat such cases as compliant with the guidelines for a period of 6 months or such extended time as considered appropriate by RBI in consultation with Government of India.

Please click on the above link for RBI Guidelines.