Can NBFC Company be owned by NRI?

Foreign direct investment rules regulate foreign investment in NBFCs. The permitted activities of such NBFCs are listed in the FDI circular – there are 18 permitted activities. Conspicuously absent there is investment activity. That is, foreign owned NBFCs cannot carry investment activity. This does not imply that such an entity cannot make any investments at all – investments can only be incidental. Step down subsidiaries can be floated by NBFCs with foreign capitalization of USD 50 million or above.

There are minimum capitalization norms depending on the percentage of foreign holding envisaged. Upto 51%, it is USD 0.5 million, 51% - 75% - it is USD 5 million, and for 100% foreign owned entities, it is USD 50 million. Minimum capitalization refers to the capital brought by foreign investors – it is not the total paid up capital of the NBFC nor the par value of the shares.

Can NBFCs make investments overseas?

Foreign investments overseas may be either in form of shares of a joint venture company or a wholly owned subsidiary (referred to as overseas direct investment or ODI), or portfolio investments in overseas stocks. ODI by NBFCs is permitted in financial sector entities in the foreign countries, subject to registration with appropriate regulatory bodies of the host country. The precondition is that the investing company must have made profits for 3 years. The limit of investment is 400% of net worth of the investing company.

Ozg NBFC Consultant

Ozg Center, New Delhi & Mumbai 

Phone # 09811415831-37-61-72-84-92-94