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Wednesday, May 21, 2003

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RBI okays direct investment in overseas listed cos

K.R. Srivats

NEW DELHI, May 20

THE Reserve Bank of India (RBI) has now operationalised a slew of big-bang measures that were announced by the Finance Minister, Mr Jaswant Singh, in January this year to bring about further flexibility in capital account transactions and further integrate the Indian financial market with the global capital markets.

These measures related to direct investments in equity of overseas companies listed in recognised stock exchanges abroad.

Sources said a listed Indian company could, effective from May 14, invest in the shares of an overseas company that is listed on a recognised stock exchange and has a shareholding in its name of not less than 10 per cent in any listed Indian company as on 1st January of the year of investment. The only condition in case of investment by the listed Indian company is that the investment should not exceed 25 per cent of its networth shown in its latest audited balance sheet.

With the RBI amending its FEMA regulations on `Transfer or issue of any foreign security', a resident individual too can effective May 14, invest in equity of any company listed in overseas stock exchanges so long as the listed overseas entity has a shareholding in its name of not less than 10 per cent in any listed Indian company as on 1st January of the year of investment. No specific limits have been specified in the case of individuals even though all transactions relating to purchase and sale of shares of the overseas company should be routed through the designated branch of an authorised dealer in India.

Further, all mutual funds registered in India can, effective May 14, make direct investments in equity of a company listed in overseas stock exchanges if such an overseas company has a shareholding in its name of "not less than 10 per cent" in any listed Indian company as on January 1 of the year of investment.

In the case of investment by mutual fund, the investment should not exceed the ceiling stipulated by the Securities and Exchange Board of India (SEBI) from time to time.

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