UAE coming out of 'grey list' is good news for India
finance companies scouting for foreign equity, startups hurt by funding winter, and private equity and venture capital funds wooing overseas investors would enjoy the spinoffs from the United Arab Emirates (UAE) shedding the stigma of being in the ‘grey list’ of the global anti-money laundering watchdog.
Last Friday, the Financial Action Task Force (FATF), the inter-government body which leads the action to combat illegal and suspicious fund flows, removed UAE from the category of “jurisdictions under increased monitoring” — better known as the grey list. The country was put on the grey list in March 2022.
The development would make it easier for UAE investors and lenders to bet on businesses in India as the regulatory dos and don’ts attached to inflows from FATF grey list countries would no longer be applicable. Besides, money flowing in from such destinations are subject to closer scrutiny by banks handling remittance and fund custodians.
Now, UAE entities can hold significant equity stakes in finance companies in India — an investment that is capped at 20% for foreign direct investment (FDI) in such outfits by the central bank.
According to Tejesh Chitlangi, joint managing partner, at IC Universal Legal, “UAE has increasingly become a significant source of FDI inflows in India and the move will only further strengthen such flows due to reduced costs of bank KYCs, funding, greater overall confidence in the jurisdiction with Indian entities and increased inflows in sectors like NBFCs wherein till date UAE-based
