NRI share deals may be out of FIPB ambit

By agencies   |   Monday, 08 August 2005, 19:30 IST
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NEW DELHI: The departments of economic affairs and industrial policy and promotion are moving in tandem to clip the Foreign Investment Promotion Board’s (FIPB’s) wings by removing a clutch of foreign direct investment (FDI) categories from its purview. As part of the proposed move, FDI applications involving transfer of shares from resident to non-resident Indians and from one non-resident Indian to another will be on the automatic route. FDI proposals in trading would also be put on the automatic window. Also, foreign investors wanting to invest in highly regulated sectors would not encounter the FIPB eye-to eye any longer. These proposals are expected to be taken to the Cabinet for approval soon. Finance ministry sources said the removal of transfer of shares to NRIs alone would rationalize the role of FIPB to a great extent. Of the 80-odd proposals that reach the FIPB every month, except for half-a-dozen or so, all concern share transfers to non-residents, the sources said. The proposals include: FDI applications involving transfer of shares from resident to non-resident Indians and from one NRI to another will now be on the automatic route, All FDI proposals in trading would also be put on the automatic window, Foreign investors wanting to invest in highly regulated sectors would not encounter the FIPB eye-to eye. As far as FDI in trading is concerned, the current policy restricts such investment to wholesale cash-and-carry business. Since FDI is not permitted in retail, FIPB is mandated to examine whether any foreign investor surreptitiously enters the retail trade via the back door -the wholesale cash-and-carry business. All investors in trading ought not to be held hostage because there are a few black sheep, officials said.