The Reserve Bank of India relaxed the rules
of Foreign Direct Investment on 9 January 2014. The decision is aimed at
providing exit option to the foreign investors. The investors can exit their
investments by selling their holding of equity or debt.
The relaxation was expected to facilitate
higher foreign direct investment (FDI) inflows into India. India saw a drop of
15 percent in FDI inflows from April 2013 to October 2013.
The exit option
given to the foreign investors is subject to the condition that any FDI will
have a minimum lock-in period without any assured return. The lock-in period
for defence and construction sector has been kept at three years and for all
other sectors it will be at least a year.
For a listed company the non-resident
investor can exit at the market price prevailing at the stock exchanges. In
case of unlisted company an investor can exit from equity shares at a price not
exceeding the price arrived at on the basis of return on equity.