RBI under the rejuvenated leadership of its new governor, Dr. Raghuram Rajan has further liberalized foreign investment norms in India through its circular no. 38 dated 6 September 2013 (Circular). The Circular has relaxed some of the restrictions imposed on non-resident shareholders of listed companies in India for acquisition of shares on the floor of a stock exchange.

Prior to the Circular coming into effect, a non-resident shareholder who was not a QFI, FII or an NRI could not purchase shares on the floor of a stock exchange without prior approval of the FIPB. The Circular relaxes this restriction on existing non-resident shareholders of Indian listed companies who are currently in control of such companies. Such non-resident controlling shareholders will now be allowed to purchase additional shares of the Indian listed company on the floor of a stock exchange under the FDI regime. The pricing for such acquisition of shares would be as per the market price of the shares, depending on whether the transaction is executed under the bulk or block trade windows provided by SEBI. However, other restrictions as may be imposed under the FDI Policy on sectoral cap, entry route, reporting requirement, etc. would be applicable to such acquisitions.

This move will assist non-resident promoters of listed companies to increase their shareholding in such companies. This move is another small step towards equal treatment of resident and non-resident promoters with respect to acquisition of shares of the listed companies they control.