Obtaining approval for issue of fresh equity to foreign investors is being made simpler. Norms for converting foreign loans and preference shares into equity are also being liberalised. In a bid to boost inflow of foreign direct investment (FDI), the government has decided to provide automatic clearance to such proposals, subject to sectoral caps and other stipulations. This means that corporates need not go through the Foreign Investment Promotion Board (FIPB) route for such approvals. The Reserve Bank of India (RBI) will provide the green signal under the automatic route, which is much simpler than the FIPB process.

More FDI segments are being placed under the automatic route to speed up FDI clearances falling in the categories of conversion of loans (including ECBs) into equity and transfer of shares from residents to non-resident investors. In the case of financial services however, transfer of equity from residents to non-resident investors would still be subject to FIPB clearance.

The liberalised procedure for such permissions will be available for FDI already covered under the automatic route provided SEBI’s takeover norms are not violated in such transfers. Pricing guidelines would also persist in the existing format.