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Sectoral Approvals
Certain sectors such as media, mining, telecom, insurance have a sectoral regulator governing the sector. In these sectors, approval for foreign investment is also required to be obtained from the sectoral regulator, in addition to approval under the FDI Policy. 
Examples of sectoral regulators are:
  • Telecom Regulatory Authority of India (TRAI) for the telecom sector,
  • Insurance Regulatory Development Authority (IRDA) for the insurance sector,
  • SEBI (for financial markets),
  • RBI (for banking and non-banking financial companies)
  • Ministry of Information and Broadcasting (MIB) for foreign investment in the media sector.
Let’s take the example of FDI in Print Media. Any foreign investment in a company engaged in publishing newspaper and periodicals (in the news and current affairs segment) requires FIPB approval. Further, only investment of up to 26% is permitted, as per the FDI Policy. The FIPB Policy also states that it is subject to the guidelines issued by the Ministry of Information & Broadcasting (MIB) on 4th December 2008. As per the MIB guidelines, approval of the MIB is also required. In addition, the approval is subject to compliance with the following conditions:
  • The largest Indian shareholder must hold at least 51% of the equity
  • At least 50% of the investment must be through induction of fresh equity, and only the balance may be through transfer of fresh equity.
  • MIB permission would be conditional on at least ¾ of the Directors on the Board of Directors of the company and all key executives and editorial staff being resident Indians.
Where sectoral approvals are also necessary,in which order should the approval applications be filed?
Let’s take an example. If Google wants to invest 20 percent in the Indian Express, how should it go about obtaining approvals?

The steps below will explain this better.
Step 1: Apply for FIPB approval
Step 2: Apply for sectoral approval
Step 3: Receive sectoral approval
Step 4: Receive FIPB approval

What are the consequences of violation of the FDI Policy, the FEMA provisions or its regulations?

The RBI incorporates the provisions of the FDI Policy into the relevant regulations – violation of the regulations is punishable with a penalty of up to thrice the amount involved (or INR 2 lakhs if the amount is not quantifiable). Where the violation is a continuing one, an additional penalty of INR 5000 per day is payable.


What should be done in case of a doubt as to the applicability or meaning of a provision of the FDI Policy?
Sometimes, the category under which an investment falls may not be clear – on the face of it, multiple sets of regulations may be applicable to it. Which interpretation should the company / investor choose? Should it choose the more favourable interpretation? No. Where the meaning of the FDI policy is unclear or if there is a doubt over whether a transaction requires investment approval, it is prudent to approach the FIPB for a clarification. The format for seeking the clarifications is as below:


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