Photo: Mint
Photo: Mint

E-commerce firms approach RBI, seek relaxed FDI norms

Large e-commerce firms, most of which have some FDI, are looking to lend to their suppliers

E-commerce companies have approached the Reserve Bank of India (RBI) seeking relaxation in foreign direct investment regulations that will enable them to lend to their suppliers. This issue was raised by e-commerce companies last month at a town hall meeting organized by RBI for large e-commerce and small entrepreneurs.

“It emerged that e-commerce companies would be happy to finance these SME entrepreneurs but the regulations do not permit them and banks are also not financing them. Most of these e-commerce companies have some foreign direct investment in them. FDI-entities are then not allowed to on-lend in India and they cannot engage in credit activities in India," said a senior RBI official who did not want to be identified.

“They have asked that RBI should relax regulations for FDI entities to enable them to extend credit. It is being examined by the central office. But FDI regulations are both with the central bank and the government," the official said.

However, the official pointed out that the holding pattern of e-commerce firms is not clear to begin with. “Most of these firms are fairly opaque entities and no one is aware how these entities are structured," he said.

Some e-commerce companies have a full-time team, which works with banks and SME entrepreneurs. They facilitate the entrepreneurs who working with them to avail financial support from the participating banks, he added.

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