Condition for NBFCs Opening their Susidiaries Abroad

Reserve Bank of India (RBI) has issued circulars under the Foreign Exchange Management Act, 1999 (FEMA) and also from regulatory perspective, advising the NBFCs to obtain its prior permission before opening branch/office/joint venture/subsidiary/representative office abroad. Broadly, the following conditions have been prescribed by RBI in this regard:-

i) Investment in non-financial services sectors shall not be permitted;

ii) Direct investment in activities prohibited under FEMA or in sectoral funds will not be permitted;

iii) Aggregate overseas investment should not exceed 100% of the Net Owned Fund (NoF);

iv) Overseas investment should not involve multi layered, cross jurisdictional structures;

v) The level of NPA of NBFC should not be more than 5% of the net advances; and the NBFC shall comply with the regulation issued FEMA, 1999 from time to time; and shall also comply with the KYC norms.

RBI has also clarified that any permission issued by it in this regard is independent of the approval process of the overseas regulators.

RBI has given permission to 28 companies to open subsidiaries abroad.

This information was given by the Minister of State for Finance, Shri Namo Narain Meena in written reply to a question in Rajya Sabha today.