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Foreign Investment in India

III. Investment in other securities

Q.37: Who is an FVCI ? +

Answer: Foreign Venture Capital Investor’ (FVCI) means an investor incorporated and established outside India and registered with Securities and Exchange Board of India under Securities and Exchange Board of India (Foreign Venture Capital Investors) Regulations, 2000

FAQs on Non-Banking Financial Companies

Liquid Asset requirement

37. What is the ratio of liquid asset requirement and the base of deposits to which the liquid asset are linked ? +

The minimum level of liquid asset between January 1 and March 31, 1998 remains unchanged at 10 per cent and 5 per cent of the regulated deposits outstanding as on September 30, 1997 for equipment leasing/hire purchase finance companies and loan/investment companies respectively, depending upon their Registration status under erstwhile Registration Scheme. However, on and from April 1, 1998, the requirement of liquid assets would be uniform for all these NBFCs except RNBCs at 12.5 per cent of the "public deposits". The ratio will be 15 per cent of public deposits on and from April 1, 1999. For RNBCs, the ratio shall remain unchanged at 10 per cent of the deposits outstanding.

External Commercial Borrowings (ECB) and Trade Credits

J. Reporting

37. How are actual transactions of an ECB reported to RBI? +

The borrowers are required to report actual ECB transactions, correctly and fully, through duly certified Form ECB 2 through the Authorised Dealer Category-I bank to DSIM as per the periodicity specified by the RBI. None of the columns in Form ECB 2 should be left blank (such columns which are not applicable for the borrowing or against which ‘nil’ information has to be given, should be suitably covered). The Form ECB 2 should reach DSIM within seven working days from the close of month to which it relates. Changes, if any, in ECB parameters should also be incorporated in Form ECB 2 suitably. Any failure to comply with reporting guidelines in respect of Form ECB 2, including failure to adhere to periodicity of reporting, may invite penal action under FEMA.

Core Investment Companies

Core Investment Companies (CICs)

37. Will adjusted net worth of all the CICs in the Group also be aggregated for compliance purposes? +

Ans: Adjusted net worth (ANW) is a concept akin to capital requirement wherein the ANW should not be less than 30% of the risk weighted assets (RWA). In cases where asset size is aggregated, all the CICs within the group will be registered as CIC-ND-SI ANW will be applicable individually.

Retail Direct Scheme

Investment and Account holdings related queries

38. Why do I have to pay a markup during my primary auction bid? +

In the non-competitive segment of primary auctions, the price at which the securities are allotted is the weighted average price of the successful competitive bids in the auction. Since this weighted average price can be calculated only after the auction is over, the price of the security through the non-competitive segment is unknown during the time of bidding. To cover for this uncertainty, a markup is applied in case the weighted average price comes out to be higher.

External Commercial Borrowings (ECB) and Trade Credits

J. Reporting

38. In light of the New ECB framework, does the borrower need to file revised Form ECB? +

No, in case no changes are made in terms and conditions of ECB, there is no need to file revised Form ECB (erstwhile Form 83).

All you wanted to know about NBFCs

D. Definition of deposits, Eligible / Ineligible Institutions to accept deposits and Related Matters

38. Why is the RBI so restrictive in allowing NBFCs to raise public deposits? +

The Reserve Bank's overarching concern while supervising any financial entity is protection of depositors' interest. Depositors place deposit with any entity on trust unlike an investor who invests in the shares of a company with the intention of sharing the risk as well as return with the promoters. Protection of depositors' interest thus is supreme in financial regulation. Banks are the most regulated financial entities. The Deposit Insurance and Credit Guarantee Corporation pays insurance on deposits up to ₹ One lakh in case a bank failed.

Domestic Deposits

IV. Advances against shares and debentures

38. Whether banks can sanction loans to Trust and Endowments against the security of shares and debentures? +

No.

Indian Currency

D) Soiled and Mutilated Banknotes

8. Is the serial number essential when assessing the value of a damaged banknote? +

The presence or absence of a serial number or other specific feature is not a determining factor when assessing damaged banknotes for value under the RBI (Note Refund) Amendment Rules, 2018.

Foreign Investment in India

III. Investment in other securities

Q.38: Where can a Foreign Venture Capital Investor (FVCI) invest ? +

Answer: A SEBI registered Foreign Venture Capital Investor may make investment in terms of schedule 7 of FEMA 20(R) as per the conditions prescribed therein.