Latest RBI monetary policy statement brings great news. RBI has eased Foreign Direct Investment regulations. This statement boosts Modi’s government’s Startup India Program.
These are 3 great Startup takeaways the announcement brings:
Start-ups can now accept Foreign Direct Investment (FDI), which means more quality venture capital options for startups, irrespective of the sectors they operate in.
Simplified share capital transfer process, which helps foreign venture capital investors to easily transfer their shares to other residents or non-residents.
Sweat equity payments to owners and to creditors of a company do not require permission under FEMA.
RBI also has opened helpstartup@rbi.org a mailbox rendering guidance and assistance to Indian Startup ecosystem. RBI has revamped filing procedure for investment and financial transactions by going paperless. Electronic forms on RBI platform will be available from February 8, helping businesses to make compliance filing seamlessly.
RBI believes “This new framework enables Startups in receiving foreign venture capital, differing contractual structures embedded in investment instruments, deferring receipt of considerations for transfer of ownership, facilities for escrow arrangements and simplification of documentation and reporting procedures”
RBI is under consultation with government to bring more reformative polices like:
External commercial borrowings (ECB) rules relaxation, which will enable Startups to get access to rupee loans using innovative instrument like convertible notes.
The RBI has also relaxed ECB norms related to eligibility of lenders. Due to this, Startups will be able to simplify overseas investment initiatives using the revamped ECB
Notification relating relaxation of Foreign Exchange Management act (FEMA) is expected soon.
Industry Reactions
“Proposals like permitting start up to access ECB, issuance of innovative FDI instruments etc., which are under consideration as per press release, if goes through will improve investor participation and also help start-ups to raise capital at low cost,” told Amarjeet Singh, Partner – Tax, KPMG in India
Legalsyne’s Take
The latest, RBI Monetary Policy Statement dated 2-01-2016 is an icing on the cake for Startups in India looking for foreign funds. Thus, making funding process seamless for startups. Also, RBI has open a new era of investor friendly policing which mirrors Government of India’s push to lighten entrepreneurial regulation. This welcome step will usher an era of transparency, investor confidence and venture growth.
