FDI norms for banks eased: DIPP

As per the Department of Industrial Policy and Promotion (DIPP), any kind of corporate debt restructuring or loan restructuring mechanism will not be considered as Foreign Direct Investment (FDI) in those banks which have foreign entities as majority shareholders.

Earlier, any kind downstream investment by an Indian company that is owned by foreign entities into another Indian company would be regarded as FDI subjected to sectoral limits.

As per DIPP, downstream investments made by Indian companies that have more 50 % foreign equity are categorized as foreign firms for investment purposes.

How will this change affect Banks?

  • Earlier when there were no such relaxations in the FDI policy, Banks were facing difficulties in restructuring corporate debt. FDI policy put ceiling in various sectors due to which Banks had apprehensions of getting caught in regulatory problems.
  • After these relaxations, Private Banks with overseas control and ownership will not face any difficulty in restructuring corporate debt.

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