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RBI's caveat on investment inflow
Our Banking Bureau
MUMBAI, January 13: The Reserve Bank of India (RBI) allowed foreign direct investment under the "automatic route" in those companies which do not fall under the government notified (annexure-III) activities and yet plan to expand activities to those areas that are notified. The annexure-III industries are industries in which foreign direct investment is allowed under automatic route as per the government notification issued in October, 1997.The Reserve Bank has also decided to grant general permission under Foreign Exchange Regulation Act (Fera) to obviate the neccessity for the Indian companies approaching RBI for permission before getting inward remittance and issuing of shares in India to the foreign investors. According to the Reserve Bank of India notification on the recently eased norms for FDI under automatic route, "companies not engaged in the annexure- III activities shall be eligible to issue shares, if they embark upon expansion programme predominantly in the said annexure-III activities,
subject to the condition that the foreign equity raised by issue of equity shares to foreign investor is utilised for such expansion." The central bank issued the notification onTuesday. Last week RBI had announced that companies engaged in the annexure-III activities can invite investment from foreign collaborators without getting the central bank's prior approval. This was as part of the government's drive to simplyfy the procedure for foreign direct investment under the `automatic route'. FDI under automatic route is also allowed in the case of newly set-up trading companies, primarily engaged in exports and registered as an export/trading/star trading house. In trading companies, foreign investment is not allowed to exceed 51 per cent of its equity capital.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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