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Press Release–F. No.44/17/2004-BO.II Government of India, Ministry of Finance, Department of Financial Services dated 21st December, 2012
Foreign Investments in Asset Reconstruction Companies (ARC)
Presently: –
(a) Foreign Direct Investment (FDI) up to 49% in the equity capital of ARC is permitted subject to certain conditions.
(b) FIIs are not permitted to invest in the equity capital of ARC
(c) General permission is granted to an FII to invest in Security Receipts (SR) up to 49% of each tranche of scheme of SR. However, a single FII cannot invest more than 10% in each tranche of scheme of SR.
This circular has made the following changes:
(a) Ceiling for FDI in ARC has been increased from the present 49% to 74%. However, no sponsor can hold more than 50% of the shareholding in an ARC either by way of FDI or by routing through an FII. Foreign investment in ARC would need to comply with the FDI policy in terms of entry route conditionality and sectoral caps.
(b) The foreign investment limit of 74% in ARC would be a combined limit of FDI and FII.
(c) Prohibition on investment by FII in ARC is being removed. The total shareholding of an individual FII cannot exceed 10% of the total paid-up capital.
(d) The limit of FII investment in SR is being enhanced from 49% to 74% of the paid-up value of each tranche of scheme of SR issued by the ARC.
(e) Individual limit of 10% for investment of a single FII in each tranche of SR issued by ARC is being removed. However, such investment must be within the FII limit on corporate bonds and sectoral caps under the extant FDI regulations have to be complied with.
