RBI relaxes FDI norms for Indians

During March 2012, the Reserve Bank of India (RBI) announced few revisions aimed at liberalising the norms for direct investment abroad by Indian residents.

The revised norms include liberalisation in regulations on qualification shares, professional services rendered and ESOP (employee stock option plan) schemes. The RBI has removed the cap of one per cent on resident individuals acquiring qualification shares for holding the post of a director in a foreign company. As per the RBI notification, remittance shall be allowed from resident individuals for acquiring the qualification shares for holding the post of a director in a foreign company to the extent prescribed in the law of the host country where it is located. Also, general permission will be granted to resident individuals to acquire shares of a foreign entity in part or full consideration for professional services rendered to the foreign company or in lieu of a director's remuneration. Earlier, the facility was subject to equity holding of not less than 51 per cent.

This apart, the government on the recommendations of the FIPB, cleared 16 proposals of FDI worth about Rs 232.67 crore. The largest FDI proposal cleared was worth Rs 175 crore of Karnataka based VRL Logistics for transportation of goods and passengers, courier services other than postal services, aircraft charter services, and wind power generation, involving the installation and sale of electricity produced by wind power generators. This apart, 21 proposals were deferred. Among these are Mahindra & Mahindra's proposal to set up a JV to develop, manufacture and provide service support for radar systems and various kinds of defence electronic systems. Other deferred proposals include Network 18 Media & Investment, YourNest Angel Fund Trust, Domino Printing Sciences Plc, UK, Advent Business Credit Development Company, Pune and Reed Elsevier India. Among the five proposals that were rejected was Bharti Shipyard's application to undertake additional defence production activity.

Further, the country received $2 billion (approx Rs 10,100 crore) FDI in January 2012. With this, cumulative inflows stood at $26.19 billion (approx 1,22,307 crore) for April- January period of the current fiscal. In January 2011, the country received FDI worth Rs 1.04 billion (approx Rs 4,725 crore). The sectors which received large FDI inflows during the 10-month period this fiscal are: Services ($4.83 billion), Pharmaceuticals ($3.20 billion), Telecommunication ($1.99 billion), Construction ($2.23 billion), Power ($1.56 billion) and Metallurgical industries ($1.65 billion).