Foreign investors can now invest in partly paid shares: RBI

Easing rules, the Reserve Bank on Monday allowed foreign investors to invest in partly paid shares and warrants of Indian companies.

Such investors, till now, were only allowed to invest in equity shares and compulsorily and mandatorily convertible preference shares or debentures recognised as foreign direct investment (FDI) compliant instruments.

Foreign investors can invest in partly paid equity shares and warrants issued by an Indian company which are now eligible instruments for the purpose of FDI and foreign portfolio investment (FPI) by foreign institutional investors (FIIs), the RBI said in a notification.

‘The pricing of the partly paid equity shares would be determined upfront and 25 per cent of the total consideration amount (including share premium, if any), would also be received upfront,’ it said.

The balance consideration towards fully paid equity shares would be received within a period of 12 months, it added.

Similar pricing formula has been prescribed for issuance of warrants to foreign investors. Non-Resident Indians (NRIs) would also be eligible to invest on non-repatriation basis in partly-paid shares and warrants issued by Indian companies, it added. 

At the same time, Non-Banking Financial Companies (NBFCs) have been allowed to accept e-KYC service as a valid process to verify identity and address proof of customers to reduce risk of fraud and forgery.

‘In order to reduce the risk of identity fraud, document forgery and have paperless KYC verification, UIDAI has launched its e-KYC service.

‘Accordingly, it has been decided to accept e-KYC service as a valid process for KYC verification under Prevention of Money Laundering (PML) (Maintenance of Records),’ the RBI said in notification addressed to NBFCs.

The RBI said information containing demographic details and photographs made available from UIDAI via e-KYC platform may be treated as an officially valid document under PML Rules. The apex bank further asked NBFCs to have proper infrastructure in place to enable biometric authentication for e-KYC.

However, the RBI made it clear that physical Aadhaar card or letter issued by UIDAI containing details of name, address and Aadhaar number received through post would continue to be accepted as an officially valid document.