Question

Which of the following statements is/are correct about the routes under which an Indian company may receive Foreign Direct Investment:

Code:

• A. 1 only
• B. 2 only
• C. Both 1 and 2
• D. Neither 1 nor 2

Answer 1

The correct option is A

1 only

The government has relaxed FDI norms for the insurance sector by permitting overseas companies to buy 49% stake in domestic insurers without prior approval. Currently, up to 26% FDI is permitted through the automatic approval route. For FDI up to 49%, the approval of the Foreign Investment Promotion Board is required.

An Indian company may receive Foreign Direct Investment under the two routes as given under:

i. Automatic Route

FDI is allowed under the automatic route without prior approval either of the Government or the Reserve Bank of India in all activities/sectors as specified in the consolidated FDI Policy, issued by the Government of India from time to time.

ii. Government Route

FDI in activities not covered under the automatic route requires prior approval of the Government which are considered by the Foreign Investment Promotion Board (FIPB), Department of Economic Affairs, Ministry of Finance.

The Indian company having received FDI either under the Automatic route or the Government route is required to comply with provisions of the FDI policy including reporting the FDI to the Reserve Bank