New Delhi: Foreign investment ceiling in Asset Reconstruction Companies (ARCs) has been increased to 74% from 49 %, a move aimed at bringing more foreign expertise in the segment. “The ceiling for FDI in ARCs has been increased from 49 % to 74 % ,” the Finance Ministry said in a statement on Friday, adding, this is subject to certain conditions.
The government had opened ARC segment for FDI in 2005 as domestic companies did not have any experience in setting up this business. Presently there are 14 ARCs in the country, of which nine have no foreign investment. ARCIL, a public sector ARC, handles about 60% of the asset restructuring business in the country.
However, foreign investment in ARCs would need to comply with the FDI policy, including the one related with sectoral caps. Further, foreign investment limit of 74 % in ARC would be a combined limit of FDI and FII.
The total shareholding of an individual FII shall not exceed 10 % of the total paid-up capital, the Ministry said. Earlier, Foreign Institutional Investors (FIIs) were permitted to invest only in Security Receipts (SRs) issued by ARCs upto 49 % of each tranche of scheme of SRs.
The Finance Ministry also said “the limit of FII investment in SRs may be enhanced from 49 % to 74 %”.
Investments by FIIs would remain within the limit on on corporate bonds, and sectoral caps under the extant FDI regulations.
FDI inflows jump 65% to $1.94 bn
India’s FDI inflows grew by over 65 % year-on-year to $ 1.94 billion in October, according to the Department of Industrial Policy and Promotion (DIPP). In October 2011, the country had attracted FDI worth $ 1.16 billion. For April-October period, however, FDI inflows have declined by about 27 % to $ 14.78 billion, from $ 20.29 billion in the year-ago period as overseas investment inflows were small in the initial months.