India may ease rules for non-Chinese investments from HK: sources

New Delhi

INDIA may reduce scrutiny of deals by Hong Kong-based investors as long as Chinese firms are not involved in the transactions, people with knowledge of the matter said.

The proposals under consideration include making it mandatory for beneficial owners from nations sharing a land border with India to seek the government's permission to acquire more than 10 per cent stake in any local firm, the sources said, asking not to be identified citing rules. The discussions are at a preliminary stage, they added.

Prime Minister Narendra Modi's administration is formalising investment rules for neighbouring countries amid a bloody border stand-off with China earlier this year. That has led to over 140 proposals worth more than US$1.75 billion - including proposals from China and Hong Kong - getting delayed and complicating deal-making for investors.

The framework is expected to speed up the approval process and bring in much-needed clarity for both private-equity firms and hedge funds and companies looking for foreign capital as they struggle amid the economic shocks generated by the pandemic.

A call made to the trade and industry ministry spokesperson was not immediately answered.

With escalating border tensions with China - the worst military crisis since a war in 1962 - India has been taking a series of steps in retaliation by banning Chinese apps, tightening visa rules for Chinese nationals and imposing curbs on companies from nations sharing a land border from bidding for government contracts.

All the investment proposals will be subject to guidelines of home affairs for security clearance and external affairs department for political clearance. BLOOMBERG