The acquisition of non-deposit taking non-banking finance companies by foreign entities has come under the scanner of the Reserve Bank of India.
The RBI's decision is driven by concerns over flow of foreign funds into the Indian financial markets through non-deposit accepting NBFCs, which are subject to less supervisory rigour.
The central bank is exploring ways to make it mandatory for foreign entities to seek the RBI's permission before going ahead with acquisitions of such non-deposit taking NBFCs.
There could be also be a process of formal reporting with the RBI. Right now, foreign entities do not need an RBI nod for acquiring non-deposit taking NBFCs.
Recently, Temasek Holdings, the Singapore government's investment arm and one of the key investors in India, made major headway by acquiring Dove Finance, a Chennai-based NBFC.
French financial services major Societe Generale, in partnership with the Burmans of Dabur, also acquired a 75 per cent stake in Apeejay Finance, a subsidiary of the Kolkata-based Apeejay Surendra Group.
With rising instances of acquisition of NBFCs by foreign players, the RBI is considering bringing such cases under a regulatory order.
Sources said many more foreign players were planning to take the NBFC route to enter Indian financial markets as the regulator was not too keen on opening up the banking sector.
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