RBI eases norms for FVCIs to invest in Indian startups

The Dollar Business Bureau 

Foreign Venture Capital Investors (FVCIs), registered with SEBI (Securities and Exchange Board of India), can now invest in Indian startups without prior approval of the Reserve Bank of India (RBI). 

FVCIs have also been allowed to invest in unlisted companies in certain sectors including biotechnology, IT related to hardware and software development, nanotechnology and dairy industry, among others, without prior permission of the central bank. 

“In order to further liberalise and rationalise the investment regime for FVCIs and to give a fillip to foreign investment in the startups, the extant regulatory provisions have been reviewed, in consultation with the Government of India and accordingly amendments have been carried out,” RBI said in a circular issued on Thursday. 

Any SEBI registered FVCI, will not require any approval from RBI and can invest in equity or equity-linked instrument or debt instrument issued by an Indian 'startup' irrespective of the sector in which the startup is engaged," RBI said in a statement on Thursday. 

The RBI said the extant regulatory provisions have been reviewed and amended in order to "further liberalise and rationalise the investment regime for FVCIs and to give a fillip to foreign investment in the startups". 

“As per the amendment, FVCIs will not require any approval from RBI and can invest in Equity or equity-linked instrument or debt instrument issued by an Indian company whose shares are not listed on a recognised stock exchange at the time of issue of the said securities/instruments,” it said. 

The sectors, in which FVCIs can engage in, are biotechnology, nanotechnology, IT related to hardware and software development, seed research and development, research and development of new chemical entities in the pharmaceutical sector, dairy, poultry, production of bio-fuels, hotel-cum-convention centres and infrastructure. 

FVCIs can also open a foreign currency account and/or a rupee account for the purpose of making transactions. In addition, there will be no restriction on transfer of any security/instrument held by the FVCI to any person resident in or outside India. 

An entity receiving investment directly from a registered FVCI will be required to report the investment, mutatis mutandis, in the form FCGPR. The necessary changes in the e-biz portal are being made and separate instructions will be issued in due course. Till such time, reporting requirements, as hitherto, shall continue, the notification added.