The Reserve Bank of India (RBI) has announced a number of regulatory changes to operations of startups in India allowing venture capital firms who have invested in startups an easier exit. The RBI said that it will be devising regulations for foreign venture capital firms to transfer shares to other residents and non-residents of India. The RBI proposed that in case of transfer of ownership of a startup, it would permit a receipt of the consideration amount on a deferred basis. The deferred amount will also be maintained in a an escrow or indemnity (a security against loss) for a period of 18 months. The Reserve Bank is also building a penalty structure for delayed reporting of foreign direct investment related transaction. The regulator will also allow startups to file reports over the Internet. Further notifications and circulars will be issued separately under the Foreign Exchange Management Act. Also read: RBI norm change will allow VC firms to bypass FDI laws to invest in ecommerce New financial instruments for startups The RBI is also allowing startups to issue FDI instruments such as convertible bonds, which aredebt instruments where a holder can convert the bond into shares of a company after a specified time period. In addition, the RBI will permit startups to access Rupee loans under External Commercial Borrowings (ECBs) and have relaxations for eligible lenders. An ECB is a financial instrument which allows Indian companies to access foreign money through multilateral development banks (an institution which caters to national development) such as the International Finance Corporation (IFC),…
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