RBI allows non-resident investor to pledge shares in Indian company in favour of NBFCs

Banking regulator said only equity shares listed on a recognised stock exchange/s in India can be pledged in favour of NBFCs

Reserve Bank of India (RBI) today said the shares of an Indian company held by the non-resident investor can be pledged in favour of Non-Banking Financial Companies, whether listed or not, in accordance with the FDI policy.

Earlier, these pledges were alowed only in favour of a bank in India, to secure the credit facilities extended to the resident investee company for bona-fide business purposes / operations.

The banking regulator said that only the equity shares listed on a recognised stock exchange/s in India can be pledged in favour of the NBFCs. Further, it said that under no circumstances, the credit concentration norms should be breached by the NBFC.

If there is a breach on invocation of pledge, the shares should be sold and the breach shall be rectified within a period of 30 days from the date of invocation of pledge.