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RBI eases norms for equity issues under FDI

The guidelines allow issuance of shares subject to certain conditions like entry route, sectoral cap, pricing guidelines and compliance with the applicable tax laws.

With around 650 branches in the state, Jammu & Kashmir Bank is the region’s lead bank. Deposits of commercial banks stood at Rs 71,47,778 crore in the same period last year.

Liberalising foreign direct investment (FDI) norms further, the Reserve Bank of India (RBI) has allowed companies to issue equity shares to a resident outside India against any type of fund subject to certain conditions.

The central bank reviewed the existing guidelines for issue of shares or convertible debentures under the automatic route and has permitted issue of equity shares against any fund payable by the investee firm, remittance of which does not require prior nod of the government or the RBI.

“Equity shares shall be issued in accordance with the extant FDI guidelines on sectoral caps, pricing guidelines and the issue of equity shares under this provision shall be subject to tax laws as applicable to the funds payable and the conversion to equity should be net of applicable taxes,” the RBI said in a notification

Earlier, an Indian company under the automatic route could issue shares/convertible debentures to a person resident outside India against lump-sum technical know-how fee, royalty external commercial borrowings (other than import dues deemed as ECB or trade credit) and import payables of capital goods by units in special economic zones. The guidelines allow issuance of shares subject to certain conditions like entry route, sectoral cap, pricing guidelines and compliance with the applicable tax laws.

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Meanwhile, bank credit growth continued to remain sluggish with addition being a tepid 9.6 per cent to Rs 61,40,925 crore for the fortnight to September 4, according to RBI data. However, during this period, deposits grew at a healthy 14 per cent to Rs 81,32,714 crore. Deposits of commercial banks stood at Rs 71,47,778 crore in the same period last year.

First published on: 18-09-2014 at 01:22 IST
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