Mumbai: In a bid to woo foreign investors, the Government has dispensed with the condition of obtaining Foreign Investment Promotion Board's (FIPB) approval for non-residents to transfer shares and convertible debentures of Indian companies from Indian residents, subject to sectoral caps.

This relaxation is not applicable to finance sector companies including banks, non-banking finance companies and insurance firms.

The non-resident shareholding after the transfer should comply with sectoral FDI limits and the price at which the transfer takes place should conform with pricing guidelines prescribed by regulators, Reserve Bank of India said in a notification today (Oct 5, 2004).

The activities of the investee company should be under the automatic route under FDI policy and transfer of shares or debentures should not attract the provisions of SEBI's (Security Exchange Board of India) takeover regulations, it said.

As a measure of simplification of procedures, increase in foreign equity participation by fresh issue of shares and conversion of preference shares into equity capital have been put under general permission provided such increase falls within the sectoral cap and are within the automatic route, it said.

The general permission does not include transfer of shares from residents to non-residents of entities in the financial sector like banks, NBFCs and insurance companies, it said.

For more details, read RBI notification