The Industry Department, on Wednesday, notified new foreign direct investment (FDI) rules whereby corporate debt restructuring (CDR) undertaken by banks owned by non-residents will not be hit by sectoral FDI cap.
“Downstream investments made by a banking company owned and/or controlled by non-residents, under CDR, or other loan restructuring mechanism, or in trading books, or for acquisition of shares due to defaults in loans, shall not count towards indirect foreign investment,” the new rule notification said. The decision will take immediate effect.
However, investments made by banks owned and controlled by non-residents in their subsidiaries and joint ventures would be treated as foreign investment. The new rules will help such banks to restructure loans of companies which are facing problems on account of economic slowdown and are unable to service their debts.
The investments made by such banks as part of the CDR, loan restructuring and acquisitions of shares due to default in loans shall not count towards indirect foreign investment, the notification said.