- The Department of Industrial Policy and Promotion (DIPP) under the Ministry of Commerce and Industry issued a notification, any kind of corporate debt restructuring or loan restructuring mechanism will not be considered as Foreign Direct Investment (FDI) in those banks which have foreign entities as majority shareholders.
- Earlier, any kind downstream investment by an Indian company that is owned by foreign entities into another Indian company would be regarded as FDI subjected to sectoral limits.
- The DIPP also clarified its position on downstream investments made by Indian companies that have more 50 % foreign equity and are categorized as foreign firms for investment purposes.
How will this change affect Banks?
- Earlier when there were no such relaxations in the FDI, Banks were facing difficulties in restructuring corporate debt, but after this relaxation bank will not face any kind of difficulty in restructuring corporate debt.
- After these relaxations, downstream investments of ICICI Bank and HDFC Bank in their insurance companies will not be counted as FDI.
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