Govt may permit 100% FDI in 25 more segments of NBFCs

Government is expected to allow 100 per cent FDI in 25 more segments of NBFCs, including commodity broking and infrastructure debt fund, with a view to attract more foreign inflows.
The proposal, according to sources, is based on the announcement for allowing FDI in more categories of Non-Banking Financial Company (NBFCs) activities, made by Finance Minister Arun Jaitley in his Budget speech.
He had said that Foreign Direct Investment (FDI) will be allowed beyond the 18 specified NBFC activities in the automatic route in other activities which are regulated by financial sector regulators.
The other segments of NBFCs and NBFIs (non-banking financial institutions) include insurance intermediaries, pension management company, asset finance company and depository participants.

Currently, 100 per cent FDI through automatic route is permitted in 18 NBFC activities including merchant banking, under writing, portfolio management services, financial consultancy and stock broking.
Now it has been proposed to permit 100 FDI through automatic route in 25 more activities, sources said.

They said the move would help in promoting ease of doing business and attracting overseas investments by doing away the need of seeking government approvals.
Commenting on the proposal, an expert the move would help the commodity broking, which is a growing segment.
"Commodity market is in a nascent stage compared to equity market. So allowing foreign investment would help bring best risk management practice in the Indian commodity broking market," said Harish Galipelli, Head, - Commodity & Currency Derivatives at JRG Wealth Management Ltd.

The other companies involved in commodity broking include SMC, Religare and Geojit BNP Paribas.
Investments in sectors that are not under the automatic
route require FIPB approval. Currently 98 per cent FDI into India comes through automatic route.
"India is emerging as a key destination for renewable energy projects, helped by a wider government policy of incentives, infrastructure and programmes designed to attract investment," it said.
India topped the rankings in 2015 with USD 11.8 billion of announced FDI in the sector. This includes Lightsource Renewable Energy's plans to invest USD 3 billion to design, install and manage more than 3 gigawatts of solar power within the country. Chinese companies Sany Group and Chint Group are also planning to invest a total of USD 5 billion in the India's renewable energy sector.

China suffered a 23 per cent decline in capital investment and a 16 per cent drop in FDI projects
Among the emerging economies, greenfield FDI inflow in India and China was followed by Indonesia (USD 38.5 billion), Mexico (USD 24.3 billion) and Brazil (USD 17.3 billion).
The report said in 2015, greenfield FDI continued to show signs of recovery, with capital investment increasing by nearly 9 per cent to USD 713 billion, alongside an increase in job creation by 1 per cent to 1.89 million. However, the number of FDI projects declined 7 per cent to 11,930.