Foreign Direct Investments in Asset Reconstruction Companies (ARCs)
Persons/Entities eligible under the Foreign Direct Investment (FDI) route, other than Foreign Institutional Investors (FIIs), are allowed to invest in the equity capital of ARCs registered with the Reserve Bank of India. In ARCs, only Foreign Direct Investment will be permitted. However, investments by FIIs will not be permitted.
Foreign Investment Promotion Board (FIPB) considers applications from eligible persons/entities under the FDI route to invest in the paid up equity capital of Asset Reconstruction Companies which are registered with the Reserve Bank of India subject to the following conditions:
a. Maximum foreign equity shall not exceed 49% of the paid up equity capital of the ARC.
b. Where investment by any individual entity exceeds 10% of the paid up equity capital, ARC should comply with the provisions of Section 3(3) (f) of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act).
Investments in Security Receipts issued by ARCs
General permission is granted Foreign Institutional Investors (FIIs) registered with Securities and Exchange Board of India (SEBI) to invest in Security Receipts (SRs) issued by ARCs registered with RBI. FIIs can invest upto 49 per cent of each tranche of scheme of Security Receipts subject to condition that investment of a single FII in each tranche of scheme of SRs shall not exceed 10 per cent of the issue.