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Govt. raises FDI limit in ARCs to 74% from 49%

By Religare
Govt. raises FDI limit in ARCs to 74% from 49%
Government of India has raised the foreign investment ceiling in Asset Reconstruction Companies (ARCs) to 74 per cent from 49 per cent. The increase was directed at bringing more foreign expertise in the segment.

Finance Ministry, in a statement, said, "The ceiling for FDI in ARCs has been increased from 49 per cent to 74 per cent."

The ministry further added that the decision to increase the stake was taken after consultation with stakeholders and the sector regulators.

However, foreign investment in ARCs will have to abide by the FDI policy which states that the foreign investment limit of 74 per cent in ARC would be a combined limit of FDI and FII.

According to the policy, the FII limit in ARCs must not go beyond 10 per cent. Earlier, FIIs were not allowed to invest in ARCs and were permitted to invest only in Security Receipts (SR) issued by ARCs up to 49 per cent of each tranche of scheme of SRs. The Finance Ministry also said "the limit of FII investment in SRs may be enhanced from 49 per cent to 74 per cent".

The government had opened the ARC segment for FDI in 2005 as domestic companies did not have any experience in setting up this business.

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