Cos Fer­ry­ing Cash for Banks Caught in FDI Pol­icy Tan­gle

DIPP puts cos un­der lo­gis­tics, al­low­ing 100% FDI; but MHA says PSARA rules, cap­ping FDI at 49%

The Economic Times - - Economy - Ruchika.Chi­tra­van­shi @times­group.com

New Delhi: Com­pa­nies fer­ry­ing cash for banks are caught in a pol­icy tan­gle with the home min­istry in­sist­ing that 100% for­eign di­rect in­vest­ment (FDI) can­not be al­lowed in them. The home min­istry has said their ac­tiv­i­ties come un­der the Pri­vate Se­cu­rity Agen­cies Reg­u­la­tion Act (PSARA) that al­lows only 49% FDI. The Depart­ment of In­dus­trial Pol­icy and Pro­mo­tion (DIPP) had brack­eted them as part of the lo­gis­tics sec­tor in which 100% FDI is al­lowed.

DIPP is re­con­sid­er­ing its stance and a clar­i­fi­ca­tion is ex­pected soon but it's not clear how this will im­pact com­pa­nies in which FDI ex­ceeds 49% in case the home min­istry view is ac­cepted.

In­dia’s big pri­vate banks that are ma­jor­ity for­eign owned may also find them­selves on the wrong side of such a pol­icy in re­spect of the wholly owned sub­sidiaries set up by them to man­age cash lo­gis­tics. Their in­vest­ment in such units would be con­sid­ered FDI as per the cur­rent pol­icy. The home min­istry has is­sued guide­lines to the depart­ment of fi­nan­cial ser­vices and the DIPP to al­low only 49% FDI in cash lo­gis­tics be­cause of the use of se­cu­rity guards and ar­moured ve­hi­cles in­te­gral to such ser­vices.

“This mat­ter is re­lated to the se­cu­rity of the coun­try. These com­pa­nies use arms, bul­let-proof ve­hi­cles and there­fore they should be reg­u­lated as pri­vate se­cu­rity agen­cies and not lust lo­gis­tics providers,” said Devraj Singh, part­ner, EY. DIPP had al­lowed 49% FDI in Sing­pai Pte for cash lo­gis­tics in 2012 and later 100% in CMS Info- sys­tem. Sing­pai Pte had sought 49% FDI as per the PSARA Act, said a se­nior of­fi­cial familiar with the mat­ter. CMS In­fos­ys­tem how­ever was con­sid­ered a cash­han­dling com­pany only pro­vid­ing lo­gis­tics ser­vices and not manned se­cu­rity guards as per the PSARA Act.

Un­der the pre­vi­ous United Pro­gres­sive Al­liance gov­ern­ment, a panel had rec­om­mended lib­er­al­iz­ing the FDI limit in pri­vate se­cu­rity agen­cies to 100% from 49%. The sug­ges­tion had been op­posed by the Bharatiya Janata Party, which heads the cur­rent gov­ern­ment.

DIPP is hold­ing talks with the home min­istry and depart­ment of finance on a clar­i­fi­ca­tion.

FDI in­flows to In­dia in­creased by over 40% to $29.44 bil­lion (.`2.02 lakh crore) in April-De­cem­ber from $21.04 bil­lion (.`1.45 lakh crore) in the year ear­lier.

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