Saturday, May 14, 2011

PLEDGE OF SHARES FOR BUSINESS PURPOSES

Reserve Bank of India (RBI) vide its Circular RBI/2010-11 /497 A. P. (DIR Series) Circular No. 57 dated May 02, 2011 has reviewed the guidelines relating to Pledge of Shares by non-resident investor.
RBI delegated its powers to the AD Category - I banks to allow pledge of shares of an Indian company held by non-resident investor(s) in accordance with the FDI policy in the following
cases subject to defined compliance's:


  • Shares of an Indian company held by the non-resident investor can be pledged in favour of an Indian bank in India to secure the credit facilities being extended to the resident investee company for bona fide business purposes subject to the defined conditions.
  • Shares of the Indian company held by the non-resident investor can be pledged in favour of an overseas bank to secure the credit facilities being extended to the non-resident investor / non-resident promoter of the Indian company or its overseas group company, subject to the defined conditions.

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