RBI allows MSEs to sell stake to foreign investors

Tags: News
The Reserve Bank has allowed micro and small enterprises (MSEs) who have de-registered their small scale industry status to sell stake to foreign investors to help them attract funds.

It has been decided that such companies may issue shares or convertible debentures to a person resident outside India, RBI said.

"a company which is reckoned as Micro and Small Enterprises (MSE)... May issue shares or convertible debentures to a person resident outside India, subject to the limits prescribed."

It also allowed industrial units not into MSE to issue shares in excess of 24 per cent of its paid up capital with approval of the government.

"any Industrial undertaking, with or without FDI, which is not an MSE,...May issue shares in excess of 24 per cent of its paid up capital with prior approval of the Foreign Investment Promotion Board," RBI said.

Small scale units are not allowed to engage in banking, financial services, civil aviation, petroleum, housing and real estate development for investment, venture capital, investment in infrastructure and service sector, atomic energy/related projects, defence, agriculture, print media, broadcasting and postal services.

As per extant RBI rules, small units may issue shares or convertible debentures to a person (other than a citizen of Bangladesh or Pakistan or Sri Lanka) or an entity outside India up to 24 per cent of paid-up capital if it has given up its small scale status.

They can also issue shares or debentures if they are not engaged in manufacturing of items reserved for small scale sectors.

The RBI decision will help small units finance their expansion programme in the allowed sectors.

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