What changed
RBI reiterated that NBFCs must secure prior NoC from the Department of Non-Banking Supervision for any overseas investment. This follows observed instances of NBFCs investing abroad without regulatory clearance, which violates FEMA regulations.
What it means for you
NBFCs cannot proceed with overseas investments without explicit RBI approval. Non-compliance invites penalties under FEMA. Lenders must ensure their overseas investment proposals are cleared by the concerned Regional Office before execution.
What you must do
- Submit application for NoC to the Regional Office where your NBFC's head office is registered before any overseas investment.
- Clearly state the intended activities of the overseas entity in the application.
- Verify that the overseas investment activity is permitted under FEMA regulations.
- Ensure compliance with FEMA 2004 and related master circulars to avoid penal action.
Who it affects
All Non-Banking Financial Companies (NBFCs), NBFCs planning joint ventures or wholly owned subsidiaries abroad, Compliance teams of NBFCs
What happens if an NBFC makes an overseas investment without RBI's NoC?
It is a violation of FEMA 2004 and attracts penal provisions as per RBI regulations.
Which RBI office should we approach for the NoC?
The Regional Office of the Department of Non-Banking Supervision in whose jurisdiction your NBFC's head office is registered.
Are there any restrictions on the type of overseas activities NBFCs can invest in?
Yes, NBFCs cannot make direct investment in a foreign entity engaged in activities not approved under FEMA.