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Moumita Bakshi Chatterjee

New Delhi, April 17 Kim Eng Securities India’s proposal to undertake the business of stock broking as a ‘non-fund based activity’ requiring minimum capitalisation of only $0.5 million has been turned down, as the Foreign Investment Promotion Board (FIPB) has pointed out that stock broking is a fund-based NBFC activity.

Kim Eng Securities India is a wholly owned subsidiary of Kim Eng Holdings Ltd, Singapore. The parent company is an independent securities broking group and one of the largest securities brokers in terms of shareholders’ fund in Singapore. The Indian subsidiary is proposing to provide only stock broking services — to carry out the activities of buying, selling or dealing in securities.

Currently, stock broking is covered under NBFC activities under which FDI up to 100 per cent is allowed on automatic route. In terms of Press Note 4 of 2006, the minimum capitalisation stands at $50 million for 100 per cent FDI, of which $7.5 million is to be brought in upfront and the balance in 24 months.

According to Press Note 12 (1999) of the NBFC activities, only six are regarded as non-fund based (investment advisory services, financial consultancy, credit reference agencies, credit rating agencies, forex broking and money changing business) and these require minimum capitalisation of only $0.5 million.

Sources said that KES had sought FIPB nod for treating stock broking as non-fund based activity, and thus, requiring a capital of $0.5 million.

However, the Department of Industrial Policy and Promotion did not support the proposal on the ground that stock broking is a fund-based NBFC activity, and hence, the capitalisation norms are applicable as stipulated.

The FIPB noted that under Press Note 12, stock broking was not amongst six activities that are regarded as non-fund based.

It, therefore, recommended the proposal for rejection, sources added.

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