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.
Labels:

Comments

Post a Comment

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 i...
3 comments
Click Here To Read more »

"ISRO has capabilities to build geostationary satellites for air quality monitoring” (downtoearth)

Pawan Gupta's findings on trans-boundary movement of pollution (Punjab to Delhi) from biomass burning in 2015 spurred debates. He participated in discussions with Indian regulators early September at the Better Air Quality Conference in Busan on the advantages of using satellite data for air quality monitoring. He explains to Down to Earth how air quality monitoring is done using satellite data. How is satellite data used to measure air pollution? Satellites that provide information on atmospheric pollutants are normally (not always) in the low earth orbits (400-1000 km above the Earth’s surface). A single satellite can carry one or more remote sensing instruments onboard that look down to earth and obtain information about the object in the field of view of satellite sensor. The Earth receives electromagnetic radiation from the sun, which travels through space and reaches the earth-atmosphere system. The radiation then interacts with the Earth’s atmosphere and the surface...
1 comment
Click Here To Read more »

What's ailing Namami Gange programme?(DTE)

Winters are extremely hectic for Sushma Patel, a vegetable grower in Uttar Pradesh’s Chunar town. Her farm is in the fertile plains of Ganga where people grow three crops a year. But this is the only season when she can grow vegetables. And before that, she needs to manually dig out shreds of plastic and wrappers from her one-hectare (ha) farm. “This is all because of the nullah,” she says, pointing at an open drain that runs through her field, carrying sewage from the neighbourhood to the Ganga. “Every monsoon, the drain overflows and inundates the field with a thick, black sludge and plastic debris. We cannot even go near the field as the stench of sewage fills the air,” she says. But Patel has no one to complain to as this is the way of life for most people in this ancient town. About 70 per cent of the people in Chunar depend on toilets that have on-site sanitation, such as septic tanks and pits. In the absence of a proper disposal or management system, people simply dump the faec...
3 comments
Click Here To Read more »