Foreign investment in Credit Information
Companies - Amendment to the Foreign Direct Investment Scheme
A.P. (DIR SERIES) CIRCULAR NO. 40, DATED
28-4-2008
Attention of
Authorised Dealer Category - I (AD Category - I) banks is invited to Schedule I
to Foreign Exchange Management (Transfer or Issue of Security by a Person
Resident Outside India) Regulations, 2000, notified vide FEMA Notification No.
20/2000-RB dated May 3, 2000, as amended from time to time.
2. It has been
decided in consultation with the Government of India to allow foreign
investment in Credit Information Companies in compliance with the Credit
Information Companies (Regulations) Act 2005 and subject to the following :
(i) The
aggregate Foreign Investment in Credit Information Companies would be 49%.
(ii) Foreign
Investment upto 49% would be allowed only with the prior approval of FIPB and
regulatory clearance from RBI.
(iii)
Investment by SEBI Registered FIIs would be permitted only through purchases in
the secondary market to an extent of 24%.
(iv) Investment
by SEBI Registered FIIs would be within the overall limit of 49% for Foreign
Investment.
(v) No FII can
individually hold directly or indirectly more than 10% of the equity.
A copy of the Press
Note 1 (2008 series) dated March 12, 2008 issued by the Government is enclosed.
3. AD Category
– I banks may bring the contents of this circular to the notice of their
constituents and customers concerned.
4. Necessary
amendments to the Foreign Exchange Management (Transfer or Issue of Security by
a Person Resident Outside India) Regulations, 2000 are being issued separately.
5. The
directions in this circular have been issued under Sections 10(4) and 11(1) of
Foreign Exchange Management Act, 1999 (42 of 1999) and is without prejudice to
permissions / approvals, if any, required under any other law.
Press Note No. 1 (2008), dated 12-3-2008 issued
by Department of Industrial Policy & Promotion (FC section)
On a review of
the extant policy on Foreign Direct Investment, Government of India has decided
to allow foreign investment in Credit Information Companies (CICs) as under.
Definitions
2. In terms of the Credit Information Companies
(Regulation) Act, 2005—
(a) ‘credit information’ means any information relating to—
(i) the amounts and the nature of loans or
advances, amounts outstanding under credit cards and other credit facilities
granted or to be granted, by a credit institution to any borrower;
(ii) the nature of security taken or proposed to be
taken by a credit institution from any borrower for credit facilities granted
or proposed to be granted to him;
(iii) the guarantee furnished or any other non-fund
based facility granted or proposed to be granted by a credit institution for
any of its borrowers;
(iv) the creditworthiness of any borrower of a credit institution;
(v) any other matter which the Reserve Bank may, consider necessary for
inclusion in the credit information to be collected and maintained by credit
information companies, and, specify, by notification, in this behalf;
(b) ‘credit information company’ means a company formed and registered
under the Companies Act, 1956 (1 of 1956) and which has been granted a
certificate of registration under sub-section (2) of section 5.
3. Policy
for foreign investment in Credit Information Companies
3.1 Foreign investment in Credit Information
Companies is subject to the Credit Information Companies (Regulation) Act,
2005.
3.2 Foreign investment, i.e, Foreign
Direct Investment (FDI) under the FDI Scheme incorporated as Schedule 1 under
regulation 5(1) of the Foreign Exchange Management (Transfer or Issue of
Security by a Person Resident Outside India) Regulations, 2000 (FEMA
Regulations) + investment by registered Foreign Institutional Investors (FII)
under the Portfolio Investment Scheme incorporated as Schedule 2 under
Regulation 5(2) of the FEMA Regulations, is allowed up to 49 per cent with
prior approval of the Government and regulatory clearance from RBI.
3.3 Investment by a registered FII under the
Portfolio Investment Scheme would be permitted up to 24 per cent only in the
CICs listed at the Stock Exchanges, within the overall limit of 49 per cent for
foreign investment.
3.4 Such FII investment would be permitted
subject to the conditions that :
(a) No single entity should directly or indirectly hold more than 10
per cent equity.
(b) Any acquisition in excess of 1 per cent will have to be reported to
RBI as a reporting requirement; and
(c) FIIs investing in CICs shall not seek a representation on the Board
of Directors based upon their shareholding.
Change in
Policy for FDI in NBFC activities
4. In pursuance of the policy as at 3 above,
Government of India has decided to delete ‘Credit Reference Agencies’ from the
list of NBFC activities in col. 20 of the Annex to Press Note 4 (2006), dated
10-2-2006.
5. FDI Policy announced vide Annex to
Press Note 4 (2006), dated February 10, 2006 stands modified to the above
extent.