India relaxes FDI into NBFCs

The government has made its latest attempt to encourage foreign investment into the country.

India’s Union Cabinet has approved the relaxation of regulations for foreign direct investment (FDI) into non-banking financial companies (NBFC), according to an official release.

The latest change permits inflow of foreign investment via the “other financial services” route regulated by any of the financial sector regulators such as the Reserve Bank of India, Securities and Exchange Board of India, and the Pension Fund Regulatory and Development Authority.

The cabinet has also removed the minimum capitalisation requirement under the FDI policy as most of the regulators are considered to already have fixed minimum capitalisation norms.

This is the third amendment this year aimed at deregulating FDI in India. In the 2016-17 budget speech, the finance minister authorised FDI in 18 specified NBFC activities such as merchant banking, underwriting and portfolio management services. After that, it announced the liberalisation of eight further sectors, including defence and civil aviation, to foreign investors in June.

The Indian government has been keen to induce FDI and boost economic activity in the country. According to a local press report, FDI in India in 2015-2016 increased by 29 percent year-on-year to $40 billion.