ESCROW ACCOUNTS FOR SECURING FDI TRANSACTIONS
To provide structured flexibility and easiness to the resident/non-resident shareholders of Indian Company, Reserve Bank of India vide its Circular RBI/2010-11/ 498 A. P. (DIR Series) Circular No. 58 dated May 02, 2011 has decided to permit AD category -1 banks to open and maintain, without prior approval of the Reserve Bank, non-interest bearing Escrow accounts in Indian Rupees in India on behalf of residents and/or non-residents, towards payment of share purchase consideration and / or provide Escrow facilities for keeping securities to facilitate FDI transactions subject to the terms and conditions. Further, It has also been decided to permit SEBI authorized Depository Participants, to open and maintain, without prior approval of the Reserve Bank, Escrow accounts for securities subject to the terms and conditions. These facilities will be applicable for both issue of fresh shares to the non- residents as well as transfer of shares from / to the non- residents.
PLEDGE OF SHARES FOR BUSINESS PURPOSES
Reserve Bank of India vide its Circular RBI/2010-11 /497 A. P. (DIR Series) Circular No. 57 dated May 02, 2011 has reviewed the guidelines relating to Pledge of Shares by non-resident investor. RBI delegated its powers to the AD Category – I banks to allow pledge of shares of an Indian company held by non-resident investor(s) in accordance with the FDI policy in the following cases subject to defined compliances:
(i) Shares of an Indian company held by the non-resident investor can be pledged in favour of an Indian bank in India to secure the credit facilities being extended to the resident investee company for bonafide business purposes subject to the defined conditions.
(ii) Shares of the Indian company held by the non-resident investor can be pledged in favour of an overseas bank to secure the credit facilities being extended to the non-resident investor / non-resident promoter of the Indian company or its overseas group company, subject to the defined conditions.
Circulars issued by RBI are attached herewith.