New Delhi: Taking note of the objections raised by the SMEs, the industry ministry has asked its finance counterpart to refrain RBI from notifying certain clauses of the FDI policy relating to financial instruments. In a letter to Department of Economic Affairs Secretary R Gopalan, the DIPP has said that RBI need not notify "the provisions" related with definition of instruments that would qualify to be foreign direct investment (FDI) or external commercial borrowing (ECB). The Department of Industrial Policy and Promotion (DIPP) is an arm of industry ministry which deals with FDI related issues. The clause, on which objections were raised by the SME sector, was inserted in the recently issued consolidated circular on FDI policy on September 30. According to the clause "only equity shares, fully, convertible and mandatorily convertible debentures and fully, compulsorily and mandatorily convertible preference shares, with no in-built options of any type, would qualify as eligible instruments for FDI. "Equity instruments issued/transferred to non-residents having in-built options or supported by options sold by third parties would lose their equity character and such instruments would have to comply with the extant ECB guidelines." The DIPP, the letter said, had received number of objections from the SME sector on the clause relating to FDI and ECB classification. The issue, it added, would have to be "revisited urgently. "In the circumstances, it is requested that RBI may kindly be advised not to notify the provision for the present and maintain status quo until we arrive at a suitable formulation after consultation," the letter said.
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