RBI allows foreign companies to open escrow accounts for Indian acquisitions

Mumbai: The Reserve Bank of India (RBI) has allowed foreign companies to open escrow or special accounts in authorised banks for buying shares in Indian companies - a move that gives them more flexibility in acquiring local companies.

Authorised banks may open escrow or special accounts on behalf of non-residents for the purpose of open offers, delisting offers and exit offers subject to SEBI regulations, RBI said in a notification.

These banks will not require prior approval of the Reserve Bank to open such accounts and these could be operated by persons appointed by the firms, the RBI said.

These non-interest bearing accounts could be opened in Indian currency jointly for the purpose. However, banks will not be allowed to provide any facilities against balance in these accounts, the notification added.

The RBI is expected to notify necessary amendments in the foreign exchange management regulations shortly in this regard. Meanwhile, as part of measures to boost oil and gas exploration in the country, the RBI eased norms for field consortium members to make payments to the operator.

RBI, in a notification, allowed banks to make payment towards cash calls to the operator for oil exploration in India either in foreign currency or in Indian rupee.

Cash call is the expenditure incurred by oilfield operators, which is reimbursed by the consortium as per the production sharing agreement.

The RBI has asked banks to ensure that the demand made by the operator for payment toward cash calls is as per the production sharing agreement. It, however, asked banks to obtain a no-objection certificate from the income tax department before making any such payments.