India also relaxes foreign investment by QFIs

May 30 – The Reserve Bank of India has granted the U.S. financial institution Morgan Stanley a banking license. The bank, one of the largest players in global M&A and advisory services, is expected to use its license to lend to corporate clients when advising on takeovers involving Indian entities. It is highly unlikely to diversify into mainstream banking operations. However, the bank is expected to ramp up its Indian wealth management services.

“The move is another sign of the recognition India is now generating as concerns the wealth of its businesses and a more liberal financial policy now coming through,” says Chris Devonshire-Ellis, founding partner of Dezan Shira & Associates. “The license will provide Morgan Stanley with the ability to provide services such as treasury, foreign exchange and corporate banking and will act as an interface between corporate India and global trade.”

In related news, the Indian government yesterday relaxed rules concerning foreign investors by increasing the number of QFIs (qualified foreign investors) to include all 27 EU members and a further 6 from the Middle East, including Saudi Arabia, Bahrain, the UAE, Oman, Kuwait and Qatar. An additional US$1 billion window has also been created beyond the previous US$20 billion limit, allowing foreigners to invest directly in Indian corporate bonds and mutual funds. The move is expected to correct recent outflows of foreign capital from India and improve the extent and amount of investments QFIs can make in the country.

Dezan Shira & Associates is a boutique professional services firm providing foreign direct investment business advisory, tax, accounting, payroll and due diligence services for multinational clients in India. For more information, please contact india@dezshira.com, visit www.dezshira.com, or download the firm’s brochure here.