Informist, Wednesday, May 12, 2021

MUMBAI – The Reserve Bank of India today said that any contribution from a sponsor Indian party to an alternative investment fund, set up in an overseas jurisdiction including International Financial Services Centres in India, will be treated as an overseas direct investment.

Accordingly, a sponsor Indian party can set up alternative investment fund in an overseas jurisdiction, including IFSCs, under the automatic route, provided it complies with the norms on investment by an Indian party entity in an entity outside India, engaged in financial services activities, the central bank said in a notification.

These norms require that for such an investment, the Indian party must:

* Have earned net profit during the preceding three financial years from financial services activities

* Be registered with the regulatory authority in India for conducting financial services activities

* Have obtained approval from the concerned regulatory authorities both in India and abroad, for venturing into such financial sector activity

* Have fulfilled the prudential norms relating to capital adequacy as prescribed by the concerned regulatory authority in India

The RBI also said that the circular on 'Direct Investment by Residents in Joint venture/ Wholly-owned subsidiary abroad' will be amended accordingly with respect to investment in step-down subsidiaries.  End

Reported by Anshika Kayastha

Edited by Akul Nishant Akhoury

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