Centre permits 100% Telecom FDI Via Automatic Route, reducing bank guarantee requirement by 80%

The government has allowed 100 percent foreign direct investment in the telecom sector through automatic route to promote ease of doing business in the industry. The telecom department has also reduced performance and financial bank guarantee requirements of telecom operators by 80 per cent. Prior to this, 100 percent of FDI was allowed, of which 49 per cent of investment was permitted through automatic route.

According to the DPIIT's press note, 100 per cent FDI is permitted across all kinds of telecom services and infrastructure providers. In the Press Note 4 (2021 series), the government has amended the 100 per cent FDI cap in the sector to "Automatic Route". The move will provide relief for Vodafone Idea, as it has been looking to raise funds from overseas to support its business.

The Department of Telecom (DoT) slashed performance and financial bank guarantee requirements of telecom operators by 80 percent. The amendment has been made in both old telecom licences in the UASL (Unified Access Services licences) category and new licences that were started in 2012- Unified Licence (UL) category.

The move will unblock cash reserves of Bharti Airtel, Reliance Jio, Vodafone Idea, BSNL internet licence holders like Tata Communications, Atria Convergence Technologies etc that they have kept with banks for securing bank guarantees (BGs).

Under the amended norms in UL, telecom operators will be required to provide a performance bank guarantee (PBG) of up to ₹ 44 crore for each service for the telecom licence compared to ₹ 220 crore mandated under the old rule.

The rule will not be applicable in cases where bank guarantees (BG) have been furnished due to any court order or are subject to any litigation.