Tuesday, August 14, 2012

Downstream investment by a banking company

The Govt of India has reviewed the policy relating to calculation of downstream investments by a banking company incorporated in India, which is owned and/or controlled by non-residents/ a
non-resident entity (s). A new Note below paragraph 3.10.4.1 in FDI policy is inserted as below:
"Downstream investment/s made by a banking company, as defined in clause (c) of Section 5
of the Banking Regulation Act, 1949, incorporated in India, which is owned and/or controlled by
non-residents/non-resident entity(s), under Corporate Debt Restructuring (CDR), or other  loan restructuring mechanism, or in trading books, or for acquisition of shares due to defaults  in loans, shall not count towards indirect foreign investment. However, their 'strategic downstream  investment' shall count towards indirect foreign investment. For this purpose, 'strategic downstream investments' would mean investment by these banking companies in their subsidiaries, joint ventures and associates."

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