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No FIPB nod required for FIIs to invest below 23% in commodity exchanges

FIPB would be required only for FDI component and government approval would not be required for investment by registered FIIs in commodity exchanges, the apex bank said

Mumbai: The Reserve Bank of India said foreign institutional investors (FIIs) can invest up to the permitted limit of 23% in commodity stock exchanges without prior approval of the government, reports PTI.

However, prior clearance from the Foreign Investment Promotion Board (FIPB) is required for foreign direct investment (FDI) in such exchanges.

"...it has been decided that prior approval of the government (FIPB) would be required only for FDI component and government approval would not be required for investment by registered FIIs in commodity exchanges," the RBI said in a notification.

India allows foreign investment in commodity exchanges, with a composite ceiling of 49% with FDI limit of 26% and FII limit of 23% under Portfolio Investment Scheme (PIS).

The Department of Industrial Policy and Promotion (DIPP) had liberalised the investment norms in commodity exchanges on 10th April through the new edition of the 'Consolidated FDI Policy' document. The RBI notification operationalise the policy announcement.

Regarding FDI policy for NBFC, RBI said foreign direct investment is permitted only in 'financial leases' (financial leasing activity) and not in 'operating leases' (operating leasing activity).

'Leasing and finance' is one of the 18 NBFC activities wherein FDI up to 100% is permitted under automatic route, subject to minimum capitalisation norms.

In order to discourage import of sub-standard machinery, the DIPP had also decided to withdraw the facility of giving equity in lieu of import of second hand equipment.

The central bank has also issued a notification in this regard.

"With a view to incentivising use of machinery embodying the latest state-of-the-art technology, compliant with international standards, in terms of being green, clean and energy efficient, it has now been decided to exclude conversion of imported second-hand machinery from the purview of this provision," the RBI said.

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