The Indian central bank in Mumbai on Friday permitted foreign institutional investors (FIIs) registered with the Securities and Exchange Board of India (SEBI) to invest in the security receipts of asset reconstruction companies (ARCs).

The Reserve Bank of India (RBI) also permitted foreign direct investment (FDI) by entities and people residing outside the country to acquire equity capital of ARCs, also known as asset management firms.

"FIIs registered with Securities and Exchange Board of India ( SEBI) are now permitted to invest in security receipts (SRs) issued by asset reconstruction companies (ARCs) registered with the Reserve Bank of India (RBI)," the central bank said in an official statement.

It said that FIIs could invest up to 49 percent of each tranche of scheme of security receipts with the proviso that the investment of a single FII in each tranche of scheme of SRs would not exceed 10 percent of the issue.

The policy on FII investments will be reviewed after one year.

In the case of FDIs, the Indian central bank has stated that Indian Foreign Investment Promotion Board (FIPB) would consider applications from eligible persons/entities for investment in the paid up equity capital of RBI-registered ARCs.

The overseas person or entity would be allowed a maximum foreign equity of 49 percent of the paid up equity capital of the ARC, the central bank said.

In cases where investment by any individual entity exceeded 10 percent of the paid up equity capital of ARCs, it would have to comply with the official guidelines.

Source: Xinhua