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Escrow Accounts for FDI now permitted

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Shobha Singh
RBI has issued a circular permitting opening of Escrow accounts (for funds and securities) for facilitating FDI transactions.
Until now, non residents could open Escrow accounts only in relation to acquisition of shares pursuant to a takeover open offer or delisting/exit offer. As per the circular issued yesterday, now Escrow accounts for holding funds or securities can be opened for any FDI transaction. Some of the important conditions specified by the RBI are as follows:
1) the accounts must be non interest bearing.
2) the account can be opened for 6 months only. Prior approval of the RBI would be required for maintaining the account beyond 6 months.
3) the 180 days period for issuance/transfer of securities after receipt of consideration would commence from the day on which the funds are transferred from the Escrow account to the bank account of the issuer/transferor.
4) balance funds remaining in the Escrow account can be freely repatriated.
5) only an AD Category I bank (in case of escrow account for funds) and a SEBI authorised DP (in case of escrow account for securities) can be appointed as escrow agents.

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