In further relaxations of norms for startups, companies with existing overseas subsidiaries can open foreign currency accounts abroad to credit their earnings (in foreign currency) from exports and sales made by them, the Reserve Bank of India announced.
The balances held in such accounts, represent exports from India, and will have to be repatriated to India within the period prescribed for realization of exports, the RBI added. The RBI also said that payments in foreign currency arising out of exports or sales can be credited to Exchange Earners Foreign Currency (EEFC) account maintained in India by the start-up.
However, this will be applicable to startup which comply with the rules and regulations laid down by the Government and the DIPP. A startup is a company which is less than five years and its turnover has not exceeded Rs 25 crore for the financial years, according to the government’s definition. The DIPP also said that a startup will have to work towards innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property.
RBI norms for stake sale in startups by VCs: In February, the RBI announced a a number of regulatory changes to operations of startups in India allowing venture capital firms who have invested in startups an easier exit. To smoothen flow of funds to startups, easier transfer of shares between residents or non-resident investors was announced. In addition, startups can issue FDI instruments such as convertible bonds, which are debt instruments where a holder can convert the bond into shares of a company after a specified time period.
Peer-to-peer lending to be regulated: Recently, the RBI issued a consultation paper where it would treat peer-to-peer (P2P) lending platforms as non-banking financial companies (NBFCs). The RBI is looking to regulate the sector with measures including requiring minimum capital of Rs 2 crore or prohibiting them from promising “extraordinary returns.” More on that here.