Moumita Bakshi Chatterjee

New Delhi, Oct. 28 The Foreign Investment Promotion Board (FIPB) has referred a proposal of ExlService.com (India) for conversion into a holding company to the Reserve Bank of India saying it had already set up two subsidiaries without prior approval, and also noted that its plans for utilising funds from the domestic market for downstream investment is “not permissible”.

“The Department of Economic Affairs (DEA) has conveyed that this is a case of post facto approval. Hence, the applicant should first be asked to approach the RBI for appropriate action under the Foreign Exchange Management Act (FEMA). The board deliberated and observed that it would not be proper for it to grant post-facto approval of a violation of FDI policy,” the board observed.

Suggesting that the proposal be referred to the RBI with intimation to the company for action under FEMA, the Board observed the applicant be also advised that downstream investment is not permissible by raising funds from the domestic market.

ExlService.com (India), an export-oriented unit, holds foreign collaboration approval for 100 per cent foreign equity participation by ExlService.com Inc, US, for setting up internet and voice-based customer care, transaction processing, and software development centre.

The company provides services in banking, financial services and insurance sectors directly and through one of its subsidiary companies — Noida Customer Operations Pvt Ltd (NCOPL).

The company has also set up another wholly owned subsidiary — Exl Support Services Pvt Ltd (ESSPL) — to provide maintenance and support services to the operations of the company and NCOPL. It did not obtain approval before setting up the wholly owned subsidiary.

ExlService.com (India) has stated that it now intends to expand its customer care transaction processing services in the Banking Financial Services & Insurance sector..