Reserve Bank of India relaxes regulations for foreign investment in start-ups

On 20 October 2016, the Reserve Bank of India (RBI) amended regulations in order to "further liberalise and rationalise the investment regime for foreign venture capital investors (FVCI) and to give a fillip to foreign investment in the startups".

As per the amendment, FVCI will not require any approval from RBI and can invest in equity or equity-linked instruments or debt instruments issued by an Indian company in ten sectors (e.g. biotechnology, IT, dairy and poultry industry, infrastructure) whose shares are not listed. Also, FVCI will not require any approval from RBI and can invest in equity or equity-linked instrument or debt instrument issued by an Indian ‘start-up’, irrespective of the sector in which the start-up is engaged. Further, FVCI do not need approval for investing in units of venture capital funds. However, FVCI will have to be registered with the Securities and Exchange Board of India (SEBI).

• Type:

  • Entry and establishment (Approval and admission)
  • Treatment and operation (Capital transfer and FOREX)

• Industry:

  • Not industry specific

• Sources:

  • Reserve Bank of India (Circular), Investment by a Foreign Venture Capital Investor (FVCI) registered under SEBI (FVCI) Regulations, 2000, https://rbi.org.in/scripts/NotificationUser.aspx?Mode=0&Id=10649, 20 Oct 2016
  • The Hindu Business Line, Foreign VCs can now invest in unlisted firms sans RBI nod, http://www.thehindubusinessline.com/economy/venture-capital/article9246371.ece, 20 Oct 2016
  • live mint, RBI relaxes norms for foreign investment in start-ups, http://www.livemint.com/Companies/OBWbKAiFZXzJiZIB3CWRRP/RBI-relaxes-norms-for-foreign-investment-in-startups.html, 20 Oct 2016