Investors seeking government approval for foreign direct investment in the country would no longer need to wait for the central bank’s green signal, a move aimed at improving the ease of doing business environment and make the Foreign Investment Promotion Board (FIPB) a truly single-window clearance mechanism.

The change, which was approved by the Parliament earlier this month as part of the Finance Bill by amending the Foreign Exchange Management Act, 1999, would soon be notified by the government after consultation with the Reserve Bank of India, a senior finance ministry official said.

A provision in the FEMA that allowed the RBI to restrict or regulate cross-border transactions and acquisition or transfer of immovable property to foreigners has been deleted.

In FY15, FDI worth R52,937 crore (about $8.5 billion) came in through the FIPB (approval route).

However, the FDI inflows happened only after the RBI approved the decisions separately under FEMA whether the FIPB route or automatic route is used. This often resulted in delays. Through the FEMA Act, the RBI exercises capital control through various instruments to maintain financial stability in the economy.

Since, the central bank is also represented in the FIPB and consulted on each FDI decision, it was felt that a separate approval under FEMA was not required under the changed business environment, the official said.

In April 2014-February 2015, the total FDI inflow into the country stood at about $41 billion, out of which only $7.4 billion came through the approval route (FIPB).

Foreigners require approval not only to invest in India, but also to sell out, a process that has often been slow under the dual scrutiny of the government and RBI.

Foreign as well as domestic investors have been complaining about red tape and bureaucracy for the poor business environment in the country. The Narendra Modi government has been taking a number of steps to change this. The government is keen to see India’s ranking to improve to 50 from 142 (out of 189) in the World Bank’s ease of doing business ranking.

As per the extant policy, FDI up to 100% is allowed under the automatic route in most of the sectors. FDI under the automatic route does not require prior approval either by the government or the RBI.

Under the government approval route, proposals are considered by the FIPB, which is housed in the Department of Economic Affairs.

For Updates Check Economy News; follow us on Facebook and Twitter