RBI announced Revisions to Liberalise Norms for Direct Investment Abroad by Indian Residents

The Reserve Bank of India (RBI) on 28 March 2012 announced a several revisions with an objective to liberalise the norms for direct investment abroad by Indian residents. The revisions include liberalisation in regulations on qualification shares, professional services rendered and Esop (employee stock option plan) schemes.

The revisions stated are as follows:

•    It was stated that proposals from the Indian party for creation of charge in the form of pledge or mortgage on the immovable or movable property and other financial assets of the Indian Party and their group companies may be considered by the RBI.
•    Also, it was declared that the bank guarantee issued by a resident bank on behalf of an overseas JV or WOS of the Indian party would be reckoned for computation of the financial commitment.
•    Considering the nature of the compulsorily convertible preference shares (CCPS), it was decided that the CCPS is to be treated at par with equity shares. The Indian party is to be allowed to undertake financial commitment based on the exposure to JV by way of CCPS.
•    RBI decided to grant general permission to resident individuals to acquire qualification shares of an overseas company for holding the director post, to acquire shares in a foreign company through ESOP scheme etc. The central bank removed the cap of one per cent on resident individuals acquiring qualification shares for holding the post of a director in a foreign company.
•    Indian resident employees or directors were permitted to accept shares offered under an Esop scheme globally, on a uniform basis, in a foreign company irrespective of the percentage of the direct or indirect equity stake. The facility was earlier subject to equity holding of not less than 51 per cent.

The central bank however stated that shares under the Esop scheme should be offered by the issuing company globally on a uniform basis and the annual return filed by the Indian company to RBI through the authorised dealer category- I bank, giving details of remittances and beneficiaries.