Govt plans new FDI norms for NBFCs
The government is working on a fresh set of FDI guidelines for parts of the NBFC sector. The new guidelines will determine FDI inflow.
By Sanjeev Sharma and Nandini Sen Gupta, TNN |
NEW DELHI: The government is working on a fresh set of FDI guidelines for parts of the NBFC sector. The new guidelines will determine FDI inflow in residential mortgage credit default protection.
This is currently not covered under the 19 NBFC financial services activities where foreign investment is allowed. The matter came up after an American financial services company, Genworth Financial, asked for permission to set up a 100% subsidiary in India.
The subsidiary, which was to be set up as an NBFC, will offer mortgage guarantee products providing residential credit default protection to lenders. In other words, the product will offer a risk coverage to lenders of home loans and mortgages like banks and financial institutions.
Genworth���s proposal was to invest over Rs 200 crore in its Indian subsidiary. The company had planned to bring in $7.5m upfront and the balance $42.5m over the next two years.
This is currently not covered under the 19 NBFC financial services activities where foreign investment is allowed. The matter came up after an American financial services company, Genworth Financial, asked for permission to set up a 100% subsidiary in India.
The subsidiary, which was to be set up as an NBFC, will offer mortgage guarantee products providing residential credit default protection to lenders. In other words, the product will offer a risk coverage to lenders of home loans and mortgages like banks and financial institutions.
Genworth���s proposal was to invest over Rs 200 crore in its Indian subsidiary. The company had planned to bring in $7.5m upfront and the balance $42.5m over the next two years.
According to the current policy, 100% FDI in NBFC is allowed under the automatic route. However, there are some minimum capitalisation norms, under which, up to 51% FDI stake requires $0.5m to be invested upfront.
For 51%-75% FDI stake, $5m needs to be invested upfront and for 75%-100% foreign investment, the minimum mandated investment amount is $50m of which at least $7.5m should be invested upfront.
For non-fund based NBFCs with foreign investment, the minimum capitalisation level is $0.5m.The department of economic affairs has asked for comments from the RBI/insurance division. Accordingly, the Genworth proposal has been deferred till mid-December.
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