What changed
Previously, FVCIs could only invest in IVCUs/VCFs via IPOs or private placements. Now, they can also purchase eligible securities through private arrangements or from a third party. Additionally, stock exchange investments are permitted under SEBI (FVCI) Regulations.
What it means for you
This expands the exit and entry options for FVCIs, potentially increasing foreign capital flow into Indian venture capital. Banks must update their compliance frameworks to facilitate these new transaction types and ensure adherence to FEMA and SEBI conditions.
What you must do
- Update internal procedures to process FVCI investments via private arrangements and third-party purchases.
- Advise customers and constituents about the expanded investment routes for FVCIs.
- Ensure all transactions comply with Schedule 6 of FEMA 20/2000-RB and SEBI (FVCI) Regulations.
- Monitor for separate notification amending FEMA 20/2000-RB and align reporting accordingly.
Who it affects
AD Category-I banks, SEBI-registered Foreign Venture Capital Investors, Indian Venture Capital Undertakings and Venture Capital Funds
What securities can FVCIs now acquire through private arrangements?
FVCIs can acquire equity, equity-linked instruments, debt, debt instruments, debentures of an IVCU or VCF, and units of schemes/funds set up by a VCF.
Are FVCIs allowed to trade these securities on stock exchanges?
Yes, but only subject to the provisions of SEBI (FVCI) Regulations, 2000 and the terms stipulated therein.
Do banks need to wait for a separate amendment notification?
Yes, the circular states that necessary amendments to FEMA 20/2000-RB are being notified separately, so banks should align with that when issued.