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RBI eases norms for PE, VC investments in infrastructure, biotech, IT & other sectors

24 October, 2016

The Reserve Bank of India (RBI) has allowed Foreign Venture Capital Investors (FVCIs) registered with the Securities and Exchange Board of India (SEBI), the capital markets regulator, to invest in private companies in several sectors without any prior permission of the central bank. 

The central bank allowed such SEBI-registered FVCIs to invest in “equity or equity-linked instrument or debt instrument” issued by private companies in sectors such as infrastructure, biotechnology, nanotechnology, information technology, seed research, dairy and poultry industry and biofuel production, according to an RBI notification issued on Thursday. 

The relaxed norms make it easier for companies to raise venture capital and private equity investments from foreign investors who are registered with the Indian capital markets regulator. 

The RBI also allowed FVCIs to invest in startups without its prior permission. The FVCIs have also been allowed to open a foreign currency account or a rupee account to make transactions. 

These relaxed norms will help rationalise the investment regime for FVCIs and give a fillip to foreign investment in the startups, the RBI said.

In February, the central bank had relaxed foreign direct investment norms to allow FVCIs to invest in Indian startups.

The relaxation of norms comes even as the Narendra Modi government’s ‘Startup India’ and ‘Stand up India’ campaigns have failed to gain much traction. 

The RBI defines a ‘startup’ as any private limited company, partnership or a limited liability partnership, registered in India less than five years ago, with a turnover of less than Rs 25 crore during any of the preceding financial years. Such entities, the central bank stipulates, should be “working towards innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property.”

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RBI eases norms for PE, VC investments in infrastructure, biotech, IT & other sectors

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