FDI/FII investment in ARC Sector has been recently enhanced by the Reserve Bank of India, vide its circular no. RBI/2013-14/191 A.P. (DIR Series) Circular No.28 dated 19th August 2013, as follows:-
- The ceiling for FDI in ARCs has been increased from 49% to 74% subject to the condition that no sponsor may hold more than 50% of the shareholding in an ARC either by way of FDI or by routing through an FII. The foreign investment in ARCs would need to comply with the FDI policy in terms of entry route conditionality and sectoral caps.
- The foreign investment limit of 74% in ARC would be a combined limit of FDI and FII. Hence, the prohibition on investment by FII in ARCs is removed. The total shareholding of an individual FII shall not exceed 10% of the total paid-up capital.
- The limit of FII investment in SRs has been enhanced from 49% to 74% of the paid up value of each tranche of scheme of Security Receipts issued by the Asset Reconstruction Companies. Further, the individual limit of 10% for investment of a single FII in each tranche of SRs issued by ARCs has been dispensed with. Such investment should be within the FII limit on corporate bonds prescribed from time to time, and sectoral caps under the extant FDI Regulations should be complied with.