The union finance ministry officials gave in-principle approval to the proposal of the Reserve Bank of India (RBI) to do away with the cumbersome procedure of incorporating a company by non-residents and facilitate foreign direct investments (FDI).
Reports indicate that the proposal may facilitate inward remittances to meet pre-incorporation expenses of a company by non-residents.
Accordingly, the RBI would allow consultants to open bank accounts for the specific purpose of incorporating a company on behalf of the non-residents wanting to set up business entity in India.
The move is aimed at promoting FDI in the country. Besides, the move may also reduce transactions cost for the industry. Faced with rising current account deficit ( CAD), the government is taking various steps to promote inflow of FDI as well as portfolio investments.
Finance Ministry officials discussed these proposals with the RBI in a recent meeting and gave in-principle approval. They also asked the RBI to prepare a draft notifications.
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