Fully foreign-owned NBFCs

The proposal to allow 100 per cent Foreign Direct Investment (FDI) in all NBFC activities has been given an in-principle clearance by the high-level committee on capital markets (HLC), headed by the RBI Governor, Dr Bimal Jalan.

This proposal will also require clearance from the Finance Minister, Mr Yashwant Sinha.

This means that investment in all activities of the NBFC sector will soon be placed on the automatic route for FDI. However, the minimum capitalisation norms will still be applicable. The Government believes that this move will have a two-fold effect. First, it could increase the levels of FDI as several foreign players have been lobbying for this. The increased competition would also lead to improved efficiency from the domestic NBFC's, many of whom have indulged in fraudulent practices costing investors crores of rupees. -- BL Research Bureau