MCA for strong measures to check misuse of FDI money
New Delhi: The Corporate Affairs Ministry has asked the Finance Ministry for strong measures to keep a tab on utilisation of money coming through foreign direct investment (FDI) route, amid instances of possible misuse.
The development comes at a time when the government is looking to attract more FDI to boost economic growth.
The Ministry of Corporate Affairs (MCA) has asked FIPB in the Finance Ministry to check all details about FDI proposals from companies, especially those related to shareholding agreements and other pacts, a government source said.
"We have asked the Foreign Investment Promotion Board (FIPB) to check the shareholding agreements and other pacts entered into, by the entities making foreign direct investments in the country," the source told PTI.
Without disclosing specific details, the source said that there have been instances of possible violations by some entities after getting the green signal for FDI.
In some cases, entities get into other business activities other than for what they have got the approval, such as hiving off an operation or setting up a new subsidiary.
"We are for encouraging FDI in the country but we should also ensure that the route is not misused," the source said.
At present, foreign direct investments can be made through the automatic and the government routes. In the automatic route, the entities can make the investment without prior approval of the government or the Reserve Bank of India whereas the latter requires prior nod of the FIPB.
FIPB offers a single window clearance for FDI proposals that are not allowed through the automatic route.
Last month, the Cabinet decided to allow FDI in the pension sector and raised the foreign investment cap in insurance to 49 percent.
Official data show that FDI flows into the country fell by more than 65 percent to USD 4.64 billion in the 2012 April-June quarter. In the year-ago period, the same stood at USD 13.4 billion.
FDI inflows touched USD 1.32 billion in June this year, much lower than USD 5.73 billion recorded during the same period in 2011.