Govt permits NRIs to own up to 100% stake in Air India
The Economic Times
March 05, 2020
ET Bureau
The cabinet allowed non-resident Indians (NRIs) to acquire up to 100% of state-owned Air India and approved 72 changes to the companies law, paving the way for direct overseas listing and decriminalising a host of offences under the act.
It also approved the previously announced consolidation of 10 public sector banks into four with effect from April 1. “Today’s decision on Air India is one milestone decision where NRIs who are Indian citizens will get permission to invest 100% in the airline,” information and broadcasting minister Prakash Javadekar told reporters in a briefing.
The government has put its entire stake in Air India up for sale. Previously, NRIs could own up to 49% in the carrier. The higher limit could increase participation in the divestment. An attempt to sell as much as 76% of Air India in 2018 had been unsuccessful.
In Line with Other Airlines There is no change in the limit for overseas investors in the national carrier, including foreign airlines, which remains at 49%, directly or indirectly.
Substantial ownership and effective control of Air India will have to remain in the hands of Indian nationals after the divestment. The change brings Air India in line with investment rules for other airlines, in which 100% FDI is permitted under the automatic route for NRIs.
The amendment is “meant to liberalise and simplify the FDI (foreign direct investment) policy to provide ease of doing business in the country”, the government said in a press release. Divestment will lead to increased FDI inflows and thereby contribute to higher investment, income and employment.
Companies Act Amendments The amendments to the Companies Act seek to decriminalise certain offences and also improve ease of doing business. “Cabinet has approved 72 changes which will result in changes to 65 sections under the Companies Act,” finance minister Nirmala Sitharaman told reporters.
These changes seek to abolish criminality with respect to 35 procedural and technical defaults, imprisonment from 11 provisions and reduce the quantum of penalties in the case of six offences. Sitharaman also said that companies having a corporate social responsibility (CSR) obligation of less than Rs 50 lakh would not have to constitute a CSR committee. These initiatives, Sitharaman said, are aimed at helping ease of doing business.
The changes are based on the recommendations of a government committee that submitted its report in November.
Only offences dealing with fraud and deceit will be considered criminal offences. As many as 95 serious offences have been reduced to 55, the official said. The proposed amendment also allows companies to seek direct listings in permissible foreign jurisdictions to boost Brand India. The move, a government official said, will provide global visibility, alternate sources of capital and broaden the investor base.
The official said there would be some restrictions on what sort of companies and instruments can be used. The Department of Economic Affairs will see what clearances are required from the Reserve
Bank of India (RBI) and Indian and foreign exchanges.
Sitharaman said the bank merger exercise is on course and will take effect on April 1. The government has been in regular touch with these banks. “Decisions have already been taken by the respective bank boards,” she told reporters.
There will be no regulatory issues, she said, adding that the government has not sought forbearance from any regulator. The government had in August 2019 announced the merger of United Bank of India and Oriental Bank of Commerce with Punjab National Bank; Syndicate Bank with Canara Bank; Allahabad Bank with Indian Bank; and Andhra Bank and Corporation Bank with Union Bank of India. Last year, Dena Bank and Vijaya Bank were merged with Bank of Baroda. Prior to this, the government had merged five associate banks of SBI and the Bharatiya Mahila Bank with the State
Bank of India.
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