RBI allows transfer of shares between NRIs, residents under FDI

Transfer of shares between non-resident Indians and residents under foreign direct investments can be done without the Reserve Bank of India's approval subject to certain conditions.

This is a step towards further liberalising the procedures and policies related to FDI. In a notification issued on Friday, the RBI said transfer of shares from a non-resident to resident or from resident to non-resident under the FDI scheme can be carried out without the prior approval of the RBI.

However, the conditions include ensuring that the original and resultant investment are in line with the extant FDI policy and FEMA regulations in terms of sectoral caps, conditions (such as minimum capitalisation) and documentation, and the pricing for the transaction is compliant with the relevant SEBI guidelines such as IPO or book-building.

A certificate from a chartered accountant indicating compliance with SEBI guidelines is also required, RBI said.

Similarly, transfer of shares where the investee company (the company in which the investment is being done) is in the financial sector can be done without prior RBI approval provided that no-objection certificates are obtained from the respective financial sector regulator, RBI said.

These steps are likely to improve the flow of FDI into Indian companies as it does away with the requirement of prior approval from the RBI, said bankers.

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