The Reserve Bank of India on Feb. 12 placed restrictions on fresh investments in non-banking finance companies from countries red flagged by the Financial Action Task Force.
According to a notification on the banking regulator’s website, jurisdictions which feature in FATF’s list of high risk countries or those placed under monitoring will have limited ability to make fresh investments in India’s NBFC sector.
“Investments in NBFCs from FATF non-compliant jurisdictions shall not be treated at par with that from the compliant jurisdictions,” the RBI said in its statement.
Fresh investors from these jurisdictions shouldn’t be allowed to directly or indirectly acquire “significant influence”, the regulator said. Fresh investors from these jurisdictions, in aggregate, should be less than the threshold of 20% of the voting power in the NBFC, the RBI said.
Existing investors in NBFCs, who had invested before their respective jurisdiction was added to the FATF lists can continue with their investment or may also bring in additional investments as per extant regulations so as to support continuity of business in India.
Among the countries in FATF’s high risk list are Democratic People’s Republic of Korea and Iran. Among those classified under increased monitoring are Cambodia, Ghana, Jamaica, Mauritius, Pakistan, Panama, Zimbabwe and others.
