NBFC - ND with FDI

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

08 July 2011 Dear All,

My client, a NBFC-ND received a notice from RBI for presenting "copies of particulars relating to approval of Foreign Exchange Department in respect of FDI received."

My question are

1) What is this approval
2) Does it required even if company receiving FDI under automatic route.

Regds

C A S.S.Agarwal, M.Com.,LL.B,

C A S.S.Agarwal, M.Com.,LL.B, (Expert)
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08 July 2011 If your company has received any FDI investment then you have to comply with the RBI regulation.

Under automatic route you have to intimate RBI that such and such FDI is investing money with quantum.

If no FDI investment is there then simply reply that FDI Investment = NIL

Querist : Anonymous

Querist : Anonymous (Querist)

08 July 2011 Dear Agarwal Sir,

thanks for prompt reply but I realy cant find answer to my question.

As I clearly mentioned that we are receiving FDI through automatic route even though we received notice for presentation of copies of approval, which I am not able to understand.

If you can pls explain in detail, will be a great help.

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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03 August 2024 Certainly! Here’s a detailed explanation regarding the RBI notice for presenting particulars related to Foreign Direct Investment (FDI) for an NBFC-ND (Non-Banking Financial Company - Non-Deposit taking):

### 1. **What is This Approval?**

The approval mentioned in the RBI notice pertains to the Foreign Exchange Management Act (FEMA) regulations governing foreign investments in India. For NBFCs, which are entities receiving foreign investment, there are specific requirements under FEMA and RBI guidelines to ensure compliance with the regulations.

- **FEMA and FDI Compliance:**
- **Automatic Route:** FDI into NBFCs can be received under the "automatic route" for sectors where the government has not specified a prior approval requirement. Under this route, no prior approval from the RBI or the Foreign Investment Promotion Board (FIPB) is required; however, the company must still adhere to post-investment compliance requirements.
- **Approval Route:** For sectors where FDI requires prior approval, a specific approval from the RBI or FIPB is necessary before receiving foreign investment.

### 2. **Requirement Even Under Automatic Route:**

Even if your NBFC-ND is receiving FDI under the automatic route, you are still required to comply with various post-investment regulatory requirements, including:

- **Reporting Requirements:** Entities receiving FDI are required to file specific forms and reports to the RBI and the Ministry of Corporate Affairs (MCA) to ensure compliance with the regulations.
- **FC-GPR:** Foreign Direct Investment (FDI) in India must be reported through the Form FC-GPR (Foreign Collaboration-General Permission Route) for the receipt of shares and other related investments.
- **FC-TRS:** Any transfer of shares or securities from a non-resident to another non-resident or a resident is to be reported through Form FC-TRS (Foreign Collaboration-Transfer of Shares).

- **Particulars of Approval:** Even under the automatic route, you might be required to provide evidence or copies of the approval/registration relating to the foreign investment to the RBI or other regulatory authorities. This is to confirm that the investment complies with the regulations and that all required filings have been properly made.

### **Detailed Explanation:**

1. **Automatic Route Compliance:**
- **Documentation:** Ensure that you have the required documentation related to the FDI under the automatic route. This includes proof of filing Forms FC-GPR and any other relevant forms or reports.
- **Compliance Checks:** The RBI might be conducting routine compliance checks to ensure that all foreign investments are properly reported and compliant with FEMA regulations.

2. **Submission to RBI:**
- **Provide Copies:** If the RBI has requested copies of particulars, it could be to verify that the FDI has been correctly reported and that all regulatory requirements have been fulfilled.
- **Contact RBI:** If there is confusion or if the notice appears to be erroneous given the automatic route, contacting the RBI or seeking professional advice might be necessary. It can help clarify why the notice was issued and ensure that all compliance requirements are being met.

3. **Consult Experts:**
- **Legal and Compliance Experts:** It may be beneficial to consult with legal and compliance experts who specialize in foreign investments and FEMA regulations. They can help ensure that all documentation is in order and assist with any responses to regulatory notices.

In summary, while FDI under the automatic route does not require prior approval, you are still required to comply with reporting and documentation requirements. The RBI notice for presenting particulars related to FDI is likely a part of ensuring that all such requirements have been met.

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