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NBFC in India has witnessed huge growth in Indian Market. Considering growth factor and expanding business globally, NBFCs have started looking to set up subsidiary/JVs in abroad.
The Reserve Bank of India (RBI) has paved the way for all NBFC desirous of setting up overseas branch/subsidiary/joint venture/representative office or undertaking investments abroad. RBI has mandated all such NBFC to obtain No Objection Certificate from Department of Non-Banking Supervision from the concerned regional office of the RBI.
NBFC (opening of Branch/Subsidiary/Joint Venture/Representative office or undertaking Investment abroad by NBFCs) Direction 2011 as amended time to time, (NBFC outbound Investment Direction) outlined the general and specific conditions subject to which the NOC will be issued the DNBS. Directions are applicable to both deposit taking as well as non-deposit taking NBFCs. Also, in addition to above, the FEMA regulation shall be applicable.
NBFC desire to set up Subsidiary or wholly owned subsidiary overseas shall satisfy conditions:
In addition to above conditions below some are the specific conditions are required to comply with:
As a general policy =, NBFCs are not allowed to open any branch abroad, but if any NBFCs who have already a branch opened in abroad for undertaking financial business shall allow continuing its operation after complying the provisions of revised guidelines as applicable.
The representative office can be set up abroad for the below purpose:
However, such entity shall not undertake any activity which involves an outlay of funds.
The NBFC has to comply with the above provisions in addition to the provisions of FEMA. i.e. The NBFC has to comply with the provisions of FEMA as well as above guidelines.
In accordance with the provisions of FEMA outbound regulations in following cases of outbound investment RBI approval is required:
There are two ways of making an investment in abroad i.e Automatic route and Approval route. The Applicant shall file an application in accordance with the provisions of FEMA. In addition, the applicant shall comply with the above provisions. The applicant shall obtain ‘No Objection Certificate’ (NOC) from the Department of Non-Banking Supervision of RBI before making an investment.
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