RBI permission now not required for VCs

By Raaghav G R

Posted on October 22, 2016

Foreign Venture Capital Investors (FVCIs) can invest in Indian startups without prior permission of the RBI, the central bank said. SEBI-registered FVCIs have also been permitted to invest in unlisted firms in sectors like biotechnology, nanotechnology, dairy, etcetera without prior permission of the RBI. The RBI said the extant regulatory provisions have been revised and amended in order to “further liberalize and rationalize the investment regime for FVCIs and encourage foreign investment in the startups”. As per the amendment, FVCIs will not require any approval from RBI and “can invest in equity or equity linked instrument or debt instrument issued by an Indian company in certain sectors whose shares are not listed”.

The sectors are: biotechnology, IT related to hardware and software development, nanotechnology, seed research and development, research and development of new chemical entities in pharmaceutical sector, dairy, poultry, production of bio-fuels, hotel-cum-convention centers and infrastructure. FVCIs can also open a foreign currency account and/or a rupee account for the purpose of making transactions. Also, there will be no restriction on transfer of any security/instrument held by the FVCI to any person resident in or outside India.

For the past few years, there has been a rising consensus in India, that the government of India should take steps to promote foreign investments in India in general. Since thousands of startups have been launched in India since early 2015, the paradigm has shifted from foreign investments in existing or established MNCs in India to foreign investments on startups. This was in fact one of the key promises of the honourable Prime minister of India, Narendra Modi, in his election campaign last year. This scheme is now called ‘Make in India’ and is aimed at developing the Indian economy through foreign investments. It is heartening to see a government body like RBI implementing that scheme through policy amendments. Promoting startups in India through foreign venture capitalist investors is especially beneficial to both startups and the economy of India because startups are innovative and have educated, talented and hard – working people working for them. India is the only country in the world, in which the majority of the population (68%) is youth! The youth of India are highly talented in various domains, hard – working and innovative. They have unfortunately not been able to find the right platform (suitable jobs or the right company or their desired line of work) to bring out or showcase their talent due to the lack – lusture policies of the previous Congress government. However, good times have truly arrived as promised by Mr. Narendra Modi and the BJP government. The change in RBI’s policies will bring out the talent in India to the fullest extent and help develop both the startups and the Indian economy. Read more on Startups

RBI permission now not required for VCs