What changed
RBI clarified that the general permission delegated to AD banks via Circular No. 16 (Oct 4, 2004) also covers two additional transaction types: transfers of shares/convertible debentures of Indian companies engaged in activities that previously required FIPB/SIA approval but now fall under the automatic route (excluding financial services), and transfers of shares by a non-resident to an Indian company under buy-back or capital reduction schemes.
What it means for you
Banks can now process these previously ambiguous FDI-related transfers without seeking separate RBI approval, reducing processing time for clients. However, all conditions from the earlier circular still apply, and financial sector entities (banks, NBFCs, insurance) remain excluded from this delegation.
What you must do
- Update internal checklists to include these two new transaction types under existing delegated powers.
- Ensure compliance with all conditions from Circular No. 16 (Oct 4, 2004) when processing these transfers.
- Verify that the Indian company is not engaged in financial services (banks, NBFCs, insurance) for automatic route transfers.
- Inform customers and constituents about this clarification to streamline their FDI-related transactions.
Who it affects
Authorised Dealer banks handling FDI transactions, Indian companies receiving FDI via share/convertible debenture transfers, Non-resident investors transferring shares under buy-back or capital reduction
Does this circular allow AD banks to process transfers for financial sector companies?
No, the clarification explicitly excludes companies engaged in financial services (banks, NBFCs, insurance) from the automatic route transfer delegation.
Are there any additional reporting requirements for these new transaction types?
The circular states that the same requirements stipulated in the annex to Circular No. 16 (Oct 4, 2004) apply, so banks must follow those existing reporting norms.