New Delhi: The RBI will soon notify the contentious FDI press note 2 and 3 which provides definition of 'owned or controlled', a term which is essential to determine whether a company is a foreign firm or a domestic entity.
The notification, which has been pending for the last four years, will be used to ensure that foreign direct investments comply with FDI ceilings and other norms.
"The Finance Ministry has sent the press note to the RBI for notification under FEMA. It may happen any time," an official in the Department of Industrial Policy and Promotion (DIPP) said.
As per the Press Notes, a company is considered as "controlled" by resident Indian citizens if the power to appoint a majority of the directors on its board is held by Indian companies and citizens.
On the other hand, a company is considered as 'owned' by resident Indian if more than 50 percent of the equity is held by the entities in India. Similarly, it would be a foreign company, if over 50 percent of the equity is held by a non-resident.
The official said the notification of these press notes would help in formulating a comprehensive definition of "control", for which a draft Cabinet not has already been moved.
The notification has been delayed by over four yeas as the Finance Ministry and the DIPP could not agree on the press notes.
Further, the move would make FDI caps below 49 percent irrelevant as a company with less than 50 percent equity by Indian residents would be considered as domestic company.
The official said that "whatever is being done indirectly should be allowed directly".
DIPP, which deals with FDI related matters, issue provisions in form of press notes or consolidated circular.
First Published: Wednesday, June 26, 2013, 21:40