Skip to main content

RBI eases rules for foreign and NRI promoters to raise stake in listed firms

MUMBAI:In a move to quicken dollar inflows, the Reserve Bank of India (RBI) has changed the rules to make it easier for foreign and NRI promoters to raise stake in listed Indian companies.
Offshore parents of such local companies can now freely purchase shares by using the services of
registered Indian brokers. Such acquisition of shares can also be funded with dividend amounts paid by Indian companies to these non-resident promoters.
The new rule will apply to all non-resident entities, including non-resident Indians (NRIs).
At present, foreign institutional investors (FIIs), qualified foreign investors (QFIs) and NRIs are eligible to buy shares on Indian stock exchanges in compliance with foreign exchange regulations.
On Friday evening, the central bank opened another door to encourage inflows by adding all nonresident promoters to the list.
"The move is keeping in mind the necessity to bring in more dollars as well as to address issues that have been raised by foreign promoters. Open offers and delisting were failing due to tax disincentives... This will also discourage dollar outflow as dividend received can be used to buy shares," said H Jayesh, founder partner at law firm Juris Corp.
There is no long-term capital gains tax on shares sold on the exchange.
According to the RBI circular, a foreign promoter using dividend to increase its shareholding will have to park the money in a "specially designated non-interest bearing rupee account for acquisition of shares on the floor of stock exchange".
The consideration for purchase of shares can also be paid by way of inward remittance through normal banking channels and debiting NRE/FCNR bank accounts of NRIs. However, if a nonresident sells the shares in a subsequent off-market transaction to another, the pricing cannot be below the floor set by the foreign exchange regulations.
RBI has told all banks to bring the contents of the notification to the "notice of their customers/constituents concerned".
Earlier this year, the government had come out with new rules to attract foreign residents to invest directly in the Indian stock market. In this route, custodians, typically MNC banks that hold the shares on behalf of these offshore investors, are responsible for collecting the tax on capital gains and meeting anti-money laundering rules. "This, besides a sluggish market, was one of the reasons why not much has come in through the QFI route," said a banker.

Comments

Popular posts from this blog

SC asks Centre to strike a balance on Rohingya issue (.hindu)

Supreme Court orally indicates that the government should not deport Rohingya “now” as the Centre prevails over it to not record any such views in its formal order, citing “international ramifications”.

The Supreme Court on Friday came close to ordering the government not to deport the Rohingya.

It finally settled on merely observing that a balance should be struck between humanitarian concern for the community and the country's national security and economic interests.

The court was hearing a bunch of petitions, one filed by persons within the Rohingya community, against a proposed move to deport over 40,000 Rohingya refugees. A three-judge Bench, led by Chief Justice of India Dipak Misra, began by orally indicating that the government should not deport Rohingya “now”, but the government prevailed on the court to not pass any formal order, citing “international ramifications”. With this, the status quo continues even though the court gave the community liberty to approach it in …

Khar’s experimentation with Himalayan nettle brings recognition (downtoearth)

Nature never fails to surprise us. In many parts of the world, natural resources are the only source of livelihood opportunities available to people. They can be in the form of wild shrubs like Daphne papyracea and Daphne bholua (paper plant) that are used to make paper or Gossypium spp (cotton) that forms the backbone of the textile industry.

Nothing can compete with the dynamism of biological resources. Recently, Girardinia diversifolia (Himalayan nettle), a fibre-yielding plant, has become an important livelihood option for people living in the remote mountainous villages of the Hindu Kush Himalaya.

There is a community in Khar, a hamlet in Darchula district in far-western Nepal, which produces fabrics from Himalayan nettle. The fabric and the things made from it are sold in local as well as national and international markets as high-end products.

A Himalayan nettle value chain development initiative implemented by the Kailash Sacred Landscape Conservation and Development Initiati…

India’s criminal wastage: over 10 million works under MGNREGA incomplete or abandoned (hindu)

In the last three and half years, the rate of work completion under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) has drastically declined, leading to wastage of public money and leaving villages more prone to drought. This could also be a reason for people moving out of the programme.

At a time when more than one-third of India’s districts are reeling under a drought-like situation due to deficit rainfall, here comes another bad news. The works started under the MGNREGA—close to 80 per cent related to water conservation, irrigation and land development—are increasingly not being completed or in practice, abandoned.

Going by the data (as on October 12) in the Ministry of Rural Development’s website, which tracks progress of MGNREGA through a comprehensive MIS, 10.4 million works have not been completed since April 2014. In the last three and half years, 39.7 million works were started under the programme. Going by the stipulation under the programme, close to 7…