Foreign firms allowed to set up NBFC subsidiaries

By Our Special Correspondent

NEW DELHI, MARCH 27. The Government has decided to grant permission to a holding company with a minimum capital of $50 million, freedom to set up a 100 per cent downstream subsidiary with a minimum capital of $5 million.

Such a subsidiary, however, would have to disinvest its equity to the minimum extent of 25 per cent through a public offering only, within a period of three years.

This decision has been taken after reviewing the policy in this regard based upon the experience gained in the working of these companies, particularly the difficulties faced in setting up operation of these companies due to difficulties in locating credible Indian partners in a short tune.

The existing guidelines for foreign equity investment in non- banking finance companies (NBFCs) provide for a 100 per cent foreign equity in a NBFC where such NBFC has to act only as a holding company.

Specific activities are to be undertaken by step down subsidiaries with minimum 25 per cent domestic equity, of which 10 per cent has to be brought up front and the remaining 15 per cent over a period of two years. Such holding companies are required to be capitalised at $50 million.

According to a Finance Ministry release, the other provisions of the NBFC guidelines remain unchanged.

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Section  : Business
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