The Reserve Bank of India today announced that optionality clauses may henceforth be allowed in Foreign Direct Investments (FDI), to facilitate investors to exit subject to the conditions of minimum lock-in period and without any assured return.

It may be recalled that till now only equity shares or compulsorily and mandatorily convertible preference shares/debentures were eligible instruments to be issued to persons resident outside India under the Foreign Direct Investment policy and these instruments were not allowed to have any optionality clause. It is expected that this relaxation will facilitate greater FDI flows into the country.

Ajit Prasad

Assistant General Manager

Optionality clauses in FDI now permitted, subject to a minimum lock in and no assured return allowed. Permission to include optionality clauses in instruments issued to non residents for Foreign Direct Investment is now allowed, subject to a specified minimum lock in period and prohibition on any assured return. Previously only equity shares and compulsorily or mandatorily convertible preference shares or debentures were eligible and were not permitted to contain optionality.