No FIPB nod required for FIIs to invest in commodity exchanges

No FIPB nod required for FIIs to invest in commodity exchanges Mumbai: The Reserve Bank Tuesday said foreign institutional investors (FIIs) can invest up to the permitted limit of 23 percent in commodity stock exchanges without prior approval of the government.

However, prior clearance from the Foreign Investment Promotion Board (FIPB) is required for foreign direct investment (FDI) in such exchanges.

"...It has been decided that prior approval of the government (FIPB) would be required only for FDI component and government approval would not be required for investment by registered FIIs in commodity exchanges," the RBI said in a notification.

India allows foreign investment in commodity exchanges, with a composite ceiling of 49 percent with FDI limit of 26 percent and FII limit of 23 percent under Portfolio Investment Scheme (PIS).

The Department of Industrial Policy and Promotion (DIPP) had liberalised the investment norms in commodity exchanges on April 10 through the new edition of the 'Consolidated FDI Policy' document. The RBI notification operationalise the policy announcement.

Regarding FDI policy for NBFC, RBI said foreign direct investment is permitted only in 'financial leases' (financial leasing activity) and not in 'operating leases' (operating leasing activity).

'Leasing and finance' is one of the 18 NBFC activities wherein FDI up to 100 percent is permitted under automatic route, subject to minimum capitalisation norms.

In order to discourage import of sub-standard machinery, the DIPP had also decided to withdraw the facility of giving equity in lieu of import of second hand equipment.

The central bank has also issued a notification in this regard.

"With a view to incentivising use of machinery embodying the latest state-of-the-art technology, compliant with international standards, in terms of being green, clean and energy efficient, it has now been decided to exclude conversion of imported second-hand machinery from the purview of this provision," the RBI said.

PTI