RBI allows foreign VCs to invest in equities via third parties

In its bid to deepen the equity and debt markets by attracting overseas funds, the Reserve Bank today allowed foreign venture capital investors to invest in securities through private arrangements or purchase from a third party.

"It has now been decided to allow foreign venture capital investors to invest in eligible securities (equity, equity-linked instruments, debt and debt instruments, debentures of a domestic venture capital undertaking or VC funds, units of schemes/funds set up by a VC fund) by way of private arrangements or purchase from a third party also," a Reserve Bank circular said.

Under the existing rules, market regulator Sebi- registered foreign VC investors are allowed to invest in these instruments through initial public offerings or through private placements. Also, they can invest in units of schemes or funds set up by a fund.

Further to this, such investors would also be allowed to invest in securities subject to the provisions of the Sebi regulations, 2000, the notification said.

The RBI further said necessary amendments to foreign exchange management (transfer or issue of security by a person resident outside India) regulations of 2000 are being notified separately.

These changes are begin brought in under Sections 10(4) and 11(1) of the Foreign Exchange Management Act of  1999, it said.