Tuesday, April 10, 2012

Government allows FII in commodity exchanges

The Industry Ministry on Tuesday came out with a  foreign direct investment (FDI) document incorporating significant changes in the FDI norms by permitting FIIs to invest up to 23 per cent in commodity exchanges without prior approval and withdrawing facility of giving equity in lieu of import of second hand equipment in order to discourage import of sub-standard machinery.
According to a notification issued by the Department of Industrial Policy and Promotion's (DIPP's) on consolidated FDI policy, the Government has decided to liberalise the policy and to mandate the requirement of Government approval only for FDI component of the investment. Such investment by FIIs, in commodity exchanges, will, therefore, no longer require Government approval. This change aligns the policy for foreign investment in commodity exchanges, with that of other infrastructure companies in the securities markets, such as stock exchanges, depositories and clearing corporations.
The Government also issued a clarification on Non-Banking Finance Companies (NBFC) stating that the activity of ‘leasing and finance,’ which is one among the 18 NBFC activities, where induction of FDI is permitted, covers only financial leases and not operating leases. This provision intends to clarify the coverage of the term ‘leasing and finance’, in so far as the NBFC sector is concerned.

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