The Reserve Bank has allowed pledging of shares of an Indian company held by non-resident investors in favour of non-banking financial companies (NBFCs) for business purposes.
"With a view to further rationalising the process and reducing the transaction time, it has been decided to delegate banks the powers to allow pledge of equity shares of an Indian company held by non-resident investors in favour of the NBFCs -whether listed or not, to secure the credit facilities extended to the resident investee company for bona-fide business purposes/operations," RBI said in a notification.
Equity shares listed on a stock exchange(s) only can be pledged in favor of the NBFCs, it added
"In case of invocation of pledge, transfer of shares should be in accordance with the credit concentration norm," it said.
RBI further clarified that under no circumstances the credit concentration norms should be breached by the NBFC.
"If there is a breach on invocation of pledge, the shares should be sold and the breach shall be rectified within a period of 30 days from the date of invocation of pledge."
Earlier, pledging of shares by an Indian company held by non-resident investors in favour of banks only.
