Changes in Consolidated FDI Policy 2017

Changes in Consolidated FDI Policy 2017

Department of Industrial Policy & Promotion release consolidated Foreign Direct Investment (“FDI”) Policy every year, with amendment to bring in line with the RBI guidelines and FEMA regulation and based on the requirement from Corporate, towards ease of doing business and encouraging Foreign Investor at large, to invest in Indian Corporate.

Last year, Consolidated FDI Policy came into effective from August 28, 2017 and will be effective till the next Consolidated FDI Policy come into force for 2018. To bring in line with RBI guidelines and as amendments required, DIPP released Press Note No. 1 (2018) dated January 23, 2018, amending few important clauses in the Consolidated FDI Policy 2017.

 Following are the brief summary of few important amendments:

Prohibition of restrictive conditions regarding audit firm

Within the FDI in Investee Companies, if Investor Company is intending to call for Joint Audit, whereby one of the auditor should not be forming part of the same audit network. Hence, this will increase the Corporate Governance check on bring brands, where the Foreign Investor will have stake and decision making power.

100% FDI is allowed in NBFC	Investment by Foreign Investor in NBFC will no longer require Government approval. 100% FDI is permitted in NBFC Companies under automatic route as against approval route.
Activity / Sector	Administrative Ministry Department
Application involving instruments from Countries of Concern falling under automatic route sectors/activities, requiring security clearance as per the extant FEMA 20, FDI Policy and security guidelines, as amended from time to time	Department of Industrial Policy and Promotion
Cases pertaining to Government approval route sectors/activities requiring security clearance as per the extant FEMA 20, FDI Policy and security guidelines, as amended from time to time	Nodal Administrative Ministries / Departments

FOREIGN INVESTMENT IS ALLOWED IN AIR-INDIA NOW

Existing policy allowed foreign airlines to invest in the Indian aviation companies up to 49% of capital, operating scheduled and non-scheduled air transport services, subject to the approval from Government. This policy was not allowed to M/s. Air India Limited. However, the restriction is removed from M/s. Air India Limited with the amendment.

100% FDI IS ALLOWED IN THE REAL ESTATE BROKING SERVICES

100% FDI is allowed in the real estate broking services (which does not tantamount to be real estate business) 

AMENDMENT IN SINGLE BRAND RETAIL TRADING :

(i)	100% FDI permitted
(ii)	Product should sold out in single brand at international market as well
(iii)	Single Brand means brand used during the manufacturing process
(iv)	Sourcing of 30% of value of goods purchased by the Indian business, should be from domestic market, after FDI above 51%. These are mandatory requirement and duty of statutory auditor to check the accounting system to ensure the procurement is done from the domestic market.

EXPANSION OF ISSUE OF EQUITY SHARES FOR PRODUCTS IMPORTED

In addition to the existing conditions for conversion/issue of equity shares for sector(s) under automatic route, issue of equity shares are allowed as against import of capital goods, machinery, equipments, and pre-operative expenses, subject to the approval from Government and filing of FC-GPR as per RBI reporting norms.

Courtesy : Mr Ashish Baid