In a recent development, The Reserve Bank of India (RBI) has allowed foreign venture capital investors (FVCIs) to invest in Indian startups without any prior permission from it.
Foreign venture capital investors that have registered themselves with the SEBI can also invest in unlisted firms belonging to various sectors including biotechnology, nanotechnology, and dairy, without RBI’s permission.
As per an official statement from RBI, “They will not require any approval from Reserve Bank and “can invest in…equity or equity-linked instrument or debt instrument issued by an Indian ‘start-up’ irrespective of the sector in which the startup is engaged.”
The RBI further stated that regulatory framework regarding this type of investment has been reviewed and relaxed with an aim to “further liberalise and rationalise the investment regime for foreign venture capital investors and to give a fillip to foreign investment in the startups.”
According to the terms of the amendment, “foreign venture capital investors will not require any approval from RBI and can invest in equity or equity-linked instrument or debt instrument issued by an Indian company in certain sectors whose shares are not listed.”
The sectors approved under the amended regulations are biotechnology, IT, hardware and software development, nanotechnology, seed research and development, chemical research, pharmaceutical sector, dairy, poultry, biofuels, hotels, convention centres, and infrastructure.