The Reserve Bank is considering easing the fund transfer norms for incorporation of companies by non-residents so as to promote foreign direct investment.

Under the new norms being contemplated by the RBI, consultants will be allowed to open bank accounts for the specific purpose of incorporating a company on behalf of the non-residents wanting to set up business entity in India.

The issue was recently discussed at a high level meeting presided over by Department of Economic Affairs Secretary Arvind Mayaram. The meeting was also attended by DIPP Secretary Saurabh Chandra, Chief Economic Advisor Rahguram Rajan and RBI officials.

"The RBI's proposal received in-principle nod at the meeting and it was asked to a draft notifications," a source said.

The proposal, sources said, will facilitate inward remittances to meet pre-incorporation expenses of a company by non-residents.

It would also do away with the cumbersome procedure of incorporating a company by non-residents and facilitate foreign direct investments (FDI).

"It will definitely help in boosting FDI in the country. There is a need to take such steps and bring down the transactions cost for the industry," an industry expert said.

Faced with rising current account deficit (CAD), the government is taking various steps to promote inflow of FDI as well as portfolio investments.

Finance Minister P Chidambaram is scheduled to visit the US and Canada to sell India's growth story and promote the country as an attractive investment destination.

In his address to a industry chamber, Prime Minister Manmohan Singh had indicated that the government would further liberalise FDI policy in order to attract investments.

During the April-January period of the current fiscal, FDI declined by 39 percent to USD 19.10 billion due to global economic uncertainties.

During the same period of the previous fiscal, FDI inflows stood at USD 31.28 billion.

Decline in foreign investments could put pressure on the country's balance of payments and may also impact the value of rupee.

Current Account Deficit (CAD), which is the difference between inflow and outflow of foreign currency, has touched a historic high of 6.7 percent of the GDP in quarter ending December. 
PTI