RBI seeks feedback on draft norms for overseas start-up investments

Mumbai, Oct 1 (KNN) The Reserve Bank of India (RBI) has sought for feedback on the draft framework to facilitate investment in overseas technology funds which deploy money in start-ups overseas.

The RBI said such investments do not meet the eligibility norms for making overseas direct investments under the automatic route at present.

“Reserve Bank has been receiving references from various Indian parties to invest in Overseas Technology Funds which in turn will further invest in overseas technology startups. Such proposals generally do not meet the eligibility norms for making the overseas direct investment under the automatic route in terms of Regulation 6 or 7 of Notification No FEMA 120 dated July 07, 2004, as amended from time to time,” RBI said in a notification.

The central bank laid down a slew of conditions to be met for the Indian party wishing to invest in the fund, including a minimum net worth of Rs. 500 crore, exclusion from the caution list it prepares, total overseas investment is under 400 per cent of the net worth and earning net profit in last 3 years.

Apart from this, for one time approval, the aggregate or cumulative investment in the overseas technology funds should not exceed 400 per cent of the net worth of the Indian party or $500 million, whichever is less, it said.

The amount to be invested in the Overseas Technology Fund will be from the internal accruals/group or associate companies in India and not borrowed from the banking system, it said.

The fund's investments in start-ups overseas should be aligned to the core business activity of the company and proper reporting should take place, it said.