New Delhi: The government will, within the next 45 days, clarify yet again the issues that have arisen after the notification of the new foreign direct investment (FDI) guidelines, said a senior commerce and industry ministry official.
“A final view on all the concerns raised by the industries and media regarding the new FDI policy regime will be addressed within one-and-a-half months. Nothing will be brushed aside,” added the official, who spoke on condition of anonymity.
The new guidelines, issued by the department of industrial policy and promotion (DIPP) in February, have created confusion, especially in terms of what it means for sectors where foreign investment is prohibited or limited.
The Reserve Bank of India (RBI) has also pointed out that seven private Indian banks, ICICI Bank Ltd, HDFC Bank Ltd, Yes Bank Ltd, IndusInd Bank Ltd, Federal Bank Ltd, ING Vysya Bank Ltd and Development Credit Bank Ltd, will have to be classified as foreign-owned banks under the new guidelines, as foreign ownership in these banks is at least 50%.
According to the new guidelines, both ownership as well as control have to be with Indians for a company to be deemed Indian.
Since the guidelines were issued, DIPP has started a consultation process with various stakeholders to resolve the confusion.
The official said the department is yet to hear from key stakeholders, including the finance ministry and RBI.
The government is also looking at how trusts should be dealt with, the official quoted in the first instance said.
Akash Gupt, executive director at audit and consulting firm PricewaterhouseCoopers, said this is important because a foreigner can also be a so-called beneficial (or indirect) owner of a trust.
“Most venture capital funds have trust structures,” Gupt added.
RBI had previously said the new guidelines could lead to the circumvention of existing foreign investment rules by allowing FDI in businesses such as multi-brand retail, where it is currently prohibited.
There are strong views on both sides of this argument, the official said, and “a final view will be taken after taking everybody’s concerns into account”.
Mint had reported on 28 May that DIPP is looking to plug loopholes in the new FDI guidelines by keeping “sensitive sectors” such as multi-brand retail out of its ambit.
The official said minister for commerce and industry Anand Sharma has asked the department to look at the concerns raised about the new guidelines.
Still, it is unlikely that the new FDI guidelines will be completely overhauled.
Soon after he took charge at the ministry, Sharma termed the new FDI policy regime a “well-considered” decision taken by an empowered group of ministers after much deliberation.
There is no need for a comprehensive review, he had said then.