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FVCIs can now buy Indian VC securities via private deals

Current · Source: Reserve Bank of India · RBI/2011-12/452 · issued 19 Mar 2012 · ~1 min read
Quick answerRBI now allows SEBI-registered Foreign Venture Capital Investors to acquire eligible securities (equity, debt, units) of Indian venture capital undertakings or funds through private arrangements or third-party purchases, in addition to IPOs and private placements.
The rule, in the simplest words
How it plays out — a real example

Rohit Mehta, a senior relationship manager at an authorised dealer bank in Mumbai, receives a request from a SEBI‑registered foreign venture capital investor to buy equity of an Indian VC fund through a private agreement. Rohit updates the bank’s checklist, checks that the deal meets Schedule 6 of FEMA and the SEBI (FVCI) regulations, processes the transaction, and warmly informs the client that the new rule now lets them invest via private arrangements.

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

Who it affects

AD Category-I banks, SEBI-registered Foreign Venture Capital Investors, Indian Venture Capital Undertakings and Venture Capital Funds

❓ Common questions

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.

📜 Read the original circular — full text as issued by RBI
RBI/2011-12/452 A.P. (DIR Series) Circular No.93 March 19, 2012 To, All Category – I Authorised Dealer banks Madam / Sir, Investment in Indian Venture Capital Undertakings and /or domestic Venture Capital Funds by SEBI registered Foreign Venture Capital Investors Attention of Authorised Dealers Category – I (AD Category - I) banks is invited to Schedule 6 to the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000 notified vide Notification No. FEMA 20 / 2000 -RB dated May 3, 2000 as amended from time to time, in terms of which, a SEBI registered Foreign Venture Capital Investor (FVCI) may invest in equity, equity linked instruments, debt, debt instruments, debentures of an Indian Venture capital Undertaking (IVCU) or of a Venture Capital Funds (VCF) through Initial Public Offer or Private Placement or in units of schemes / funds set up by a VCF, subject to such terms and conditions mentioned therein. 2. It has now been decided, to allow FVCIs to invest in the eligible securities (equity, equity linked instruments, debt, debt instruments, debentures of an IVCU or VCF, units of schemes / funds set up by a VCF) by way of private arrangement / purchase from a third party also, subject to terms and conditions as stipulated in Schedule 6 of Notification No. FEMA 20 / 2000 -RB dated May 3, 2000 as amended from time to time. It is also being clarified that SEBI registered FVCIs would also be allowed to invest in securities on a recognized stock exchange subject to the provisions of the SEBI (FVCI) Regulations, 2000, as amended from time to time, as well as the terms and conditions stipulated therein. 3. AD Category - I banks may bring the contents of the circular to the notice of their customers and constituents concerned. 4. Necessary amendments to Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000 (Notification No. FEMA 20/2000-RB dated May 3, 2000) are being notified separately. 5. The directions contained in this circular have been issued under Sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law. Yours faithfully, (Meena Hemchandra) Chief General Manager-in-Charge
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2011-12/452 · issued 19 Mar 2012. The plain-English explanation above is BankPulse’s own independent summary.
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Worked example & action-note template

Example: if you are a Compliance officer at a bank this circular applies to (AD Category-I banks, SEBI-registered Foreign Venture Capital Investors, Indian Venture Capital Undertakings and Venture Capital Funds), your first concrete step on “FVCIs can now buy Indian VC securities via private deals” is: “Update internal procedures to process FVCI investments via private arrangements and third-party purchases.” (RBI issued this 19 Mar 2012).

  1. Circular: RBI/2011-12/452 -- FVCIs can now buy Indian VC securities via private deals
  2. Issued: 19 Mar 2012
  3. Action required: Update internal procedures to process FVCI investments via private arrangements and third-party purchases.
  4. Action required: Advise customers and constituents about the expanded investment routes for FVCIs.
  5. Action required: Ensure all transactions comply with Schedule 6 of FEMA 20/2000-RB and SEBI (FVCI) Regulations.
  6. Action required: Monitor for separate notification amending FEMA 20/2000-RB and align reporting accordingly.
  7. Owner: ____________ Target date: ____________
  8. Board/committee approval needed? Y / N
  9. Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.

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Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=7071&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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