Following government’s decision to phase out the Foreign Investment Promotion Board (FIPB), the Reserve Bank of India (RBI) is likely to frame standard operating procedure (SOP) for approval of foreign direct investment (FDI) proposals by ministries. The government has taken decision to abolish FIPB and form a new mechanism with an aim to improve ease of doing business and to remove an additional layer in the form of FIPB which is no longer required. RBI is the nodal agency for administration of foreign investments and foreign exchange.
Once the FIPB is abolished, the onus of approving FDI proposals would be on the ministries and regulatory authorities concerned, hence in a recent inter-ministerial meeting, the committee discussed on the proposal for setting up norms for FDI approvals in sensitive sectors, which are currently under government approval of the FDI policy. It has also discussed the possibility of approving the FDI proposals along with grant of licences. The committee has pointed that in the sensitive sectors like defence and telecom, companies having licences can only seek foreign investments.
Further, the committee noted that the government may request RBI to prepare the standard operating procedure for every ministry and the Home Ministry could be asked to vet the FDI proposals from Pakistan and Bangladesh. All these issues are under discussions of the committee formed by the government, which includes representatives from the RBI, Finance Ministry, the Department of Industrial Policy and Promotion, and the Home Affairs Ministry. The committee is expected to submit its report within two months which will give guidelines on FDI approval procedures in the sensitive sectors.