Friday, January 10, 2014

Reserve Bank of India relaxed Foreign Direct Investment rules

The Reserve Bank of India relaxed the rules of Foreign Direct Investment on 9 January 2014. The decision is aimed at providing exit option to the foreign investors. The investors can exit their investments by selling their holding of equity or debt.
The relaxation was expected to facilitate higher foreign direct investment (FDI) inflows into India. India saw a drop of 15 percent in FDI inflows from April 2013 to October 2013.
The exit option given to the foreign investors is subject to the condition that any FDI will have a minimum lock-in period without any assured return. The lock-in period for defence and construction sector has been kept at three years and for all other sectors it will be at least a year.
For a listed company the non-resident investor can exit at the market price prevailing at the stock exchanges. In case of unlisted company an investor can exit from equity shares at a price not exceeding the price arrived at on the basis of return on equity.