Sunday, January 26, 2014: The Reserve Bank of India relaxed foreign direct investment (FDI) norms, on 9th January 2014 vide their notification: RBI/2013-2014/436 A.P. (DIR Series) Circular No. 86, to give foreign investors an option to exit their investments by selling their holdings of equity or debt.
As per the modified norms, FDI contracts can now have optionality clauses, which allows investors to exit, subject to the conditions of minimum lock-in period and without any assured returns.
Until now, only equity shares or compulsorily and mandatorily convertible preference shares or debentures could be issued to persons resident outside India under the FDI policy and these instruments were not allowed to have any optionality clause. It is expected that this relaxation will facilitate greater FDI flows into the country.
Considering that electronics sector is expected to attract significant FDI, this additional flexibility is likely to facilitate greater FDI inflows in the country.Interested readers may further access the detailed RBI notifications at http://www.rbi.org.in/scripts/NotificationUser.aspx?Id=8682&Mode=0
