Govt ups FDI cap in ARCs to 74%
To spur investments in the sector expected to play a key role in reducing bad debts, the government has also removed several regulatory restrictions including the bar on FII investment in Asset Reconstruction Companies (ARCs).
As per new guidelines, the 74% foreign investment limit would be a composite one, including FDI and FII. The finance ministry said in a release on Friday that the total shareholding of an individual FII shall not exceed 10% of the total paid-up capital. Further, no shareholder will be allowed to acquire more than 50% in an ARC as FDI or by routing the investment through FIIs. Hitherto, the 49% cap has been only for FDI, and FII investment was barred.
Also, the foreign investment in ARCs would need to comply with the FDI policy in terms of entry route conditions and sectoral caps. The ministry said the ceilings of FDI and FII were reviewed in consultation with the stakeholders and the sector regulators. RBI would shortly bring out the necessary notification/circular under Foreign Exchange Management Act (Fema), while the capital market regulator Sebi will put out a notification under Sebi (FII) Regulations, the ministry added.
In November 2005, the Centre had permitted FDI in the equity capital of ARCs upto 49%. It had also allowed FIIs
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