The Department of Industrial Policy & Promotion (DIPP) on 28 August 2017 released the Consolidated Foreign Direct Investment (FDI) Policy containing all the changes in rules and procedures notified by the Union Government over the past year.
The new consolidated document aims to ensure greater ease of doing business in India and an investor-friendly climate for foreign investors so that the country attracts more FDI.
Highlights of the policy
• The consolidated policy lays down the general conditions on FDI, procedures for government approval and sector specific conditions on FDI.
• For the first time, the document has included start-ups. As per the norms, start-ups can raise up to 100 per cent of funds from Foreign Venture Capital Investor (FVCI).
• The start-ups can issue equity or equity linked instruments or debt instruments to FVCI against receipt of foreign remittance.
• Person residing outside India (other than citizens of Pakistan and Bangladesh) can purchase convertible notes issued by Indian start-up company for Rs 25 lakh or more in a single tranche.
• Non Resident Indians can also acquire convertible notes on non-repatriation basis.
• A citizen of Pakistan or an entity incorporated in Pakistan is also barred from investing in defence, space, atomic energy sectors, etc.
• A start-up company, engaged in a sector that requires government approval for foreign investment, can issue convertible notes to a non-resident only with approval of the Government.
• The start-up issuing convertible notes will be required to provide reports as prescribed by the RBI.
• It also said the rule allowing foreign airlines to own up to 49 per cent in Indian carriers do not apply to Air India.
Convertible Note is an instrument issued by a start-up company determining that it has received money as debt, which will be repaid at the discretion of the holder or will be converted into specified number of shares of the start-up.
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