The Reserve Bank of India in its another measure to prop up rupee and bring more Foreign Direct Investment (FDI) in the country, has hiked the limit for foreign investment in Asset Reconstruction Companies (ARCs) to 74 percent from the earlier cap of 49 percent. The decision of the central bank follows Cabinet decision earlier this month to liberalise FDI norms in various sectors.
As per the RBI notification "The ceiling for FDI in ARCs has been increased from 49 percent to 74 percent subject to the condition that no sponsor may hold more than 50 percent of the shareholding in an ARC either by way of FDI or by routing through a foreign institutional investors (FII)". The foreign investment limit of 74 percent in ARC would be a combined limit of FDI and FII.
Further, the apex bank has allowed the FIIs to invest in Security Receipts (SRs) up to 74 percent of each tranche of scheme of SRs issued by the ARC. The banks circular stated that the individual limit of 10 percent for investment of a single FII in each tranche of SRs issued by ARCs may be dispensed with. Such investment should be within the FII limit on corporate bonds prescribed from time to time, and sectoral caps under the extant FDI Regulations should be complied with.
As per the RBI notification "The ceiling for FDI in ARCs has been increased from 49 percent to 74 percent subject to the condition that no sponsor may hold more than 50 percent of the shareholding in an ARC either by way of FDI or by routing through a foreign institutional investors (FII)". The foreign investment limit of 74 percent in ARC would be a combined limit of FDI and FII.
Further, the apex bank has allowed the FIIs to invest in Security Receipts (SRs) up to 74 percent of each tranche of scheme of SRs issued by the ARC. The banks circular stated that the individual limit of 10 percent for investment of a single FII in each tranche of SRs issued by ARCs may be dispensed with. Such investment should be within the FII limit on corporate bonds prescribed from time to time, and sectoral caps under the extant FDI Regulations should be complied with.
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