Reserve Bank of India
RTR4DP3V11 Nov. 2014Kolkata, IndiaCommuters travel past a Reserve Bank of India (RBI) building in Kolkata November 11, 2014. India raised the minimum capital requirement for so-called shadow banks and tightened rules on deposits and bad loans to avoid any potential risk to the economy from these rapidly growing finance firms by regulating them like traditional banks.REUTERS/Rupak De Chowdhuri (INDIA - Tags: BUSINESS)

In an attempt to create an ecosystem conducive for the growth of entrepreneurship in the country, the Reserve Bank of India (RBI) on Tuesday announced several regulatory relaxations for start-up enterprises.

The RBI said that it is planning to make several regulatory changes to ease cross-border transactions for start-ups and will be finalised in consultation with the Government of India.

The apex bank said in a statement that the proposed changes include enabling start-up enterprises, irrespective of the sector in which they are engaged, to receive foreign venture capital investment and also explicitly enabling transfer of shares from foreign venture capital investors to other residents or non-residents. In case of transfer of ownership of start-up enterprises, the central bank will allow receipt of the consideration amount on a deferred basis up to a period of 18 months. 

Other changes proposed include online submission of A2 forms for outward remittances and simplifying the process for dealing with delayed reporting of Foreign Direct Investment (FDI) transaction by building a penalty structure into the regulations itself.

The RBI added that a few proposals under consideration include permitting start-ups to access rupee loans under External Commercial Borrowing (ECB) framework from eligible lenders, allowing the issuance of innovative FDI instruments like convertible notes, and streamline overseas investment operations.

The banking regulator cleared that certain issues which are permissible under the existing regime will be clarified: Issuance of shares without cash payment through sweat equity or against any legitimate payment owed by the company remittance of which does not require any permission under FEMA; and collection of payments by start-up enterprises on behalf of their subsidiaries abroad.

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