Foreign investment into Non-Banking Finance Companies is allowed to the extent of 100%

under the automatic route in only the following activities, viz. Merchant Banking, Under
Writing, Portfolio Management Services, Investment Advisory Services, Financial Consultancy,
Stock Broking, Asset Management, Venture Capital, Custodian Services, Factoring, Credit
Rating Agencies, Leasing & Finance, Housing Finance, Forex Broking, Credit Card Business,
Money Changing Business, Micro Credit and Rural Credit.
Furthermore, such FDI in a NBFC would also be subject to the following minimum
capitalisation norms:1
(i) US $ 0.5 million for foreign capital up to 51% to be brought up front.
(ii) US $ 5 million for foreign capital more than 51% and up to 75% to be brought up front.
(iii) US $ 50 million for foreign capital more than 75% out of which US $ 7.5 million to be
brought up front and the balance in 24 months.
(iv) NBFCs:(i) having foreign investment more than 75% and up to 100%, and
(ii) with a minimum capitalisation of US $ 50 million, can set up step down subsidiaries
for specific NBFC activities, without any restriction on the number of operating
subsidiaries and without bringing in additional capital. The minimum capitalization
condition as mandated by para 3.10.4.1,2 therefore, shall not apply to downstream
subsidiaries.
(v)Joint Venture operating NBFCs that have 75% or less than 75% foreign investment can also
set up subsidiaries for undertaking other NBFC activities, subject to the subsidiaries also
complying with the applicable minimum capitalisation norm mentioned in (i), (ii) and (iii) above
and (vi) below.

1 http://dipp.nic.in/English/Policies/FDI_Circular_2015.pdf
2 Downstream investment by an Indian company, which is not owned and/or controlled by resident
entity/ies, into another Indian company, would be in accordance/compliance with the relevant sectoral
conditions on entry route, conditionalities and caps, with regard to the sectors in which the latter Indian
company is operating. Note: Downstream investment/s made by a banking company, as defined in clause
(c) of Section 5 of the Banking Regulation Act, 1949, incorporated in India, which is owned and/or
controlled by non-residents/a non-resident entity/non-resident entities, under Corporate Debt
Restructuring (CDR), or other loan restructuring mechanism, or in trading books, or for acquisition of
shares due to defaults in loans, shall not count towards indirect foreign investment. However, their
'strategic downstream investment' shall count towards indirect foreign investment. For this purpose,
'strategic downstream investments' would mean investment by these banking companies in their
subsidiaries, joint ventures and associates.

(vi) Non- Fund based activities: US $0.5 million to be brought upfront for all permitted non-fund
based NBFCs irrespective of the level of foreign investment subject to the following condition:It
would not be permissible for such a company to set up any subsidiary for any other activity, nor
it can participate in any equity of an NBFC holding/operating company.
The following activities would be classified as Non-Fund Based activities:
(a) Investment Advisory Services
(b) Financial Consultancy
(c) Forex Broking
(d) Money Changing Business
(e) Credit Rating Agencies
(vii) This will be subject to compliance with the guidelines of RBI.
Note: (i) Credit Card business includes issuance, sales, marketing & design of
various payment products such as credit cards, charge cards, debit cards,
stored value cards, smart card, value added cards etc.
(ii) Leasing & Finance covers only financial leases and not operating leases.
FDI in operating leases is permitted up to 100% on the automatic route.