What changed
Earlier, for transfer of shares from residents to non-residents in a financial services company, AD banks required NoCs from the respective financial sector regulators of the investee company, transferor, and transferee to be filed with form FC-TRS. Now, RBI has removed this NoC filing requirement under FEMA, effective from the date of the circular. The underlying 'fit and proper' or due diligence checks mandated by the sector regulator remain in force.
What it means for you
This simplifies the documentation process for FDI-related share transfers in financial sector entities, reducing compliance burden for banks and their customers. Banks no longer need to collect and verify NoCs from multiple regulators for FEMA purposes, but must still ensure that the non-resident investor meets the sector regulator's eligibility criteria. The change does not affect other regulatory approvals required under separate laws.
What you must do
- Update internal checklists and FC-TRS processing guidelines to remove the requirement for NoC filing from financial sector regulators.
- Continue to verify that the non-resident investor satisfies any 'fit and proper' or due diligence conditions stipulated by the respective financial sector regulator.
- Inform your customers and constituents about this waiver through appropriate channels.
- Ensure that all other existing instructions on share transfers under FEMA remain unchanged and are complied with.
Who it affects
Category-I Authorised Dealer Banks, Resident sellers of shares in financial services companies, Non-resident buyers of shares in financial services companies, Financial sector regulators (e.g., RBI, SEBI, IRDAI, PFRDA)
Do we still need to obtain NoCs from financial sector regulators for FDI share transfers?
No, the requirement to obtain and file NoCs with form FC-TRS has been waived under FEMA. However, any 'fit and proper' or due diligence requirements imposed by the respective financial sector regulator must still be complied with.
Does this circular affect other regulatory approvals needed for the share transfer?
No, this waiver is only from the FEMA perspective. All other permissions or approvals required under any other law remain unchanged and must be obtained as before.
Which entities are covered by this waiver?
The waiver applies to transfers of shares from residents to non-residents where the investee company is in the financial services sector. It covers the investee company, transferor, and transferee entities.