Sectoral Caps - FDI in Non-Banking Finance Companies (NBFC)
% of Equity/ FDI Cap
Foreign investment in NBFC is allowed under the automatic route in only the following activities:
(i) Merchant Banking
(ii) Under Writing
(iii) Portfolio Management Services
(iv) Investment Advisory Services
(v) Financial Consultancy
(vi) Stock Broking
(vii) Asset Management
(viii) Venture Capital
(ix) Custodian Services
(xi) Credit Rating Agencies
(xii) Leasing & Finance
(xiii) Housing Finance
(xiv) Forex Broking
(xv) Credit Card Business
(xvi) Money Changing Business
(xvii) Micro Credit
(xviii) Rural Credit
(1) Investment would be subject to the following minimum capitalisation norms:
(i) US $ 0.5 million for foreign capital up to 51% to be brought upfront.(ii) US $ 5 million for foreign capital more than 51% and up to 75% to be brought upfront.(iii) US $ 50 million for foreign capital more than 75% out of which US $ 7.5 million to be brought upfront and the balance in 24 months.(iv)NBFCs (i) having foreign investment more than 75% and up to 100%, and (ii) with a minimum capitalisation of US $ 50 million, can set up step down subsidiaries for specific NBFC activities, without any restriction on the number of operating subsidiaries and without bringing in additional capital. The minimum capitalization condition as mandated by para 184.108.40.206, therefore, shall not apply to downstream subsidiaries.(v) Joint Venture operating NBFCs that have 75% or less than 75% foreign investment can also set up subsidiaries for undertaking other NBFC activities, subject to the subsidiaries also complying with the applicable minimum capitalisation norm mentioned in (i), (ii) and (iii) above and (vi) below.(vi)Non- Fund based activities: US $0.5 million to be brought upfront for all permitted non-fund based NBFCs irrespective of the level of foreign investment subject to the following condition:It would not be permissible for such a company to set up any subsidiary for any other activity, nor it can participate in any equity of an NBFC holding/operating company.Note: The following activities would be classified as Non-Fund Based activities:
(a) Investment Advisory Services
(b) Financial Consultancy
(c) Forex Broking
(d) Money Changing Business
(e) Credit Rating Agencies(vii) This will be subject to compliance with the guidelines of RBI.
Note:(i)Credit Card business includes issuance, sales, marketing & design of various payment products such as credit cards, charge cards, debit cards, stored value cards, smart card, value added cards etc.(ii) Leasing & Finance covers only financial leases and not operating leases. FDI in operating leases is permitted up to 100% on the automatic route.
(2)The NBFC will have to comply with the guidelines of the relevant regulator/s, as applicable.
Reference: Clause 5.2.26 of the Consolidated FDI Policy Circular of 2016 (D/o IPP F. No. 5(1)/2016-FC-1 Dated the June 07, 2016) issued by Department of Industrial Policy & Promotion, Ministry of Commerce & Industry, Government of India.