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FOREIGN DIRECT INVESTMENT (FDI) IN ASSET RECONSTRUCTION COMPANIES*

[Enclosure to A. P. (DIR series) Circular No. 16 dated November 11, 2005]

F. No. 44/17/2004-BO II
Government of India
Ministry of Finance
Department of Economic Affairs
(Banking Division)

Jeevan Deep,
Parliament Street, N Delhi
8th November, 2005

Press Release

FOREIGN DIRECT INVESTMENT (FDI) IN
ASSET RECONSTRUCTION COMPANIES*

Government has decided to permit Foreign Direct Investment (FDI) in the equity capital of Asset Reconstruction Companies (ARCs). Foreign Investment Promotion Board (FIPB) would henceforth consider applications from persons/entities eligible to invest in India in the equity capital of Asset Reconstruction Companies registered with Reserve Bank of India under the FDI route, subject to the following conditions:

a) Maximum foreign equity shall not exceed 49% of the paid up capital.

b) Where any individual investment exceeds 10% of the equity, ARC should comply with the provisions of Section 3(3)(f) of SARFAESI Act,**

Foreign Direct Investment alone will be permitted; investments by Foreign Institutional Investors (FIls) will not be permitted.

2. The policy on FDI in ARCs would be reviewed after two years.

3. Necessary notification/circular under FEMA are being brought out separately by Reserve Bank of India.

-sd/-
(Amitabh Verma)
Joint Secretary to the Government of India

Copy forwarded to Press Information Officer, Press information Bureau for giving wide publicity to the above Press Release.


*Companies registered/to be registered with RBI as Securitization Companies / Reconstruction Companies under the SARFAESI Act for the purpose of carrying on/commencing the business of asset reconstruction.

**SARFAESI Act — Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.


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